Calculate breakeven point (BEP) in units and revenue
Fixed Costs ($)
Unit Variable Cost ($)
Unit Price ($)
Target Profit ($, optional)
Result
Step-by-Step Derivation
Breakeven Formula
Contribution Margin = Price - Variable Cost
BEP Units = Fixed Costs / Contribution Margin
BEP Revenue = BEP Units × Unit Price
Breakeven analysis is one of the most fundamental tools in business decision-making.
⚠Fixed costs are constant within the relevant range; variable costs change linearly with output. Real situations may be more complex.
What Is the Breakeven Point?
The breakeven point (BEP) is the level of sales where total revenue equals total costs. Above BEP you make a profit; below BEP you incur a loss. It helps business owners understand the minimum sales needed to avoid losing money.
Fixed Costs
Do not vary with output: rent, equipment depreciation, admin salaries.
Variable Costs
Change linearly with output: raw materials, packaging, piece-rate labor.
Contribution Margin
Price minus variable cost per unit. Each sale contributes this amount to covering fixed costs.
Margin of Safety
Actual sales minus breakeven sales. Larger margin = stronger risk resistance.
Teaching Example: Fixed costs $200K, unit price $50, variable cost $30. Contribution margin = $20. BEP units = 200,000/20 = 10,000 units. BEP revenue = $500K. Target $100K profit: need (200K+100K)/20 = 15,000 units.
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