Breakeven Calculator
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Breakeven Point (Units) = Fixed Costs / (Selling Price per Unit - Variable Costs per Unit)
How to Use the Calculator
- Input Fixed Costs:
- Definition: Fixed costs are expenses that remain constant regardless of production or sales volume.
- Examples: Rent, salaries, insurance premiums.
- Enter the value: Input the total fixed costs into the designated field.
- Input Variable Costs per Unit:
- Definition: Variable costs are expenses that fluctuate based on production or sales volume.
- Examples: Raw materials, direct labor, packaging costs.
- Enter the value: Input the cost per unit for variable expenses.
- Input Selling Price per Unit:
- Definition: The price at which you sell each unit of your product or service.
- Enter the value: Input the selling price per unit.
- Calculate Breakeven Point:
- Click the "Calculate" button.
- The calculator will determine the breakeven point in units.
Example
The cost of setting up a certain bread business is £10,000. This includes the costs for obtaining necessary appliances and securing a lease for a store. The costs for the ingredients, labour, utilities, and rent are £5 per loaf. The loaf is being sold at £10 each (hey, this is fancy artisanal bread). How many loaves of bread does the business need to sell to reach breakeven?
Breakeven units = Fixed costs / (selling price per unit - variable costs per unit).
Breakeven units = £10,000 / (£10 - £5) = 2,000 loaves of bread.
| Fixed Costs | Variable Costs per Unit | Selling Price per Unit | Breakeven Point (Units) |
|---|---|---|---|
| £10,000 | £5 | £10 | 2,000 |
Key definitions
- Breakeven Point: The number of units you need to sell to cover your total costs.
- Above Breakeven Point: If you sell more units than the breakeven point, you'll make a profit.
- Below Breakeven Point: If you sell fewer units than the breakeven point, you'll incur a loss.
- Margin of Safety: The difference between your actual sales volume and the breakeven point. A higher margin of safety indicates a stronger financial position.
- Contribution Margin: The difference between your selling price and variable costs per unit. A higher contribution margin means you have more money to cover fixed costs and generate profit.