How To Calculate Break Even Analysis Formula

Break even analysis is a crucial tool for businesses to determine the sales volume required to cover both fixed and variable costs. Understanding this point helps in making informed decisions about pricing, production, and marketing strategies.

1. Enter the fixed costs, variable cost per unit, and selling price per unit.
2. Click ‘Calculate’.
3. View the results and break even chart below.

The break even formula is:

Break Even Point (BEP) = Fixed Costs / (Selling Price per Unit – Variable Cost per Unit)

Comparison of Break Even Points for Different Pricing Strategies

Pricing Strategy	Selling Price	Break Even Point
Premium	$50	100 units
Mid-range	$35	150 units
Budget	$20	250 units

• Regularly review and update your break even analysis to account for changes in costs and market conditions.
• Consider using sensitivity analysis to test how changes in input values affect the break even point.

What is the difference between fixed and variable costs?

Fixed costs are expenses that must be paid regardless of production or sales volume, such as rent and salaries. Variable costs change with production or sales volume, like materials and labor directly related to production.

SBA’s Guide to Break Even Analysis

Open Study College’s Break Even Analysis Guide