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Breakeven Calculator

LAST UPDATE: September 1st, 2018

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What is a Breakeven or Breakeven point?

A breakeven is the number of units that a business needs to sell to cover costs. After the breakeven point is reached, the next unit sold will yield a profit for the business.

If a business:

  • Sells more units than the breakeven point, they will be profitable.
  • Sells the same number of units as the breakeven point, they will break even (make no profit or loss).
  • Sells fewer units than the breakeven point, they will lose money.

Breakeven is calculated by looking at fixed (also known as overhead or indirect costs) and variable costs (the costs associated with producing more units) as well as the sale price of each unit.

The breakeven point is important in planning for both profitability and avoidance of loss.

Formula (How breakeven is calculated)

Breakeven Units = Fixed Costs / (Price per Unit – Variable Cost per Unit)

Example

A business has a new product line with:

  • Fixed Costs of $20,000
  • Variable Costs of $10 per unit
  • Units sell for $20 per unit

Breakeven Units = 20,000 / (20 Р10) = 20,000 / 10 = 2,000

In this scenario, the firm will need to sell 2,000 units to breakeven.

Sources and more resources