Break-Even Point Calculator
The Break-Even Point is the stage at which an investment's total revenues are equal to its total expenses. At this point, there is neither profit nor loss; profit is zero.
Key Terms
- Fixed Costs: Expenses that are paid regardless of sales volume (rent, salaries, insurance, etc.).
- Variable Costs: Costs incurred for each unit of product sold (raw materials, packaging, shipping, etc.).
- Selling Price Per Unit: The final price at which one unit of product is sold to the customer.
- Contribution Margin: The difference between Selling Price and Variable Cost Per Unit. It shows how much each sale contributes to covering fixed costs.
Break-Even Point Formula
The formula used to calculate the break-even point in units is:
Break-Even Point (Units) = Total Fixed Costs / (Selling Price Per Unit - Variable Cost Per Unit)
How it is Calculated?
Suppose you have a boutique business and your monthly fixed expenses are 20,000 TL. You sell a bag for 500 TL and the cost of each bag to you (variable cost) is 200 TL:
- Contribution Margin: 500 - 200 = 300 TL
- Break-Even Point (Units): 20,000 / 300 = 66.67 units
In this case, you need to sell at least 67 bags per month to cover your monthly fixed expenses and start making a profit.