**Instructions:** Use this Break Even Point Calculator to compute the break-even point (\(BEP\)), by indicating the fixed cost (\(FC\)), the variable unit cost (\(VC\)), and the selling price (\(P\)):

## Break-even point Calculator

More about the break-even calculator so you can better understand how to use this calculator. First we start with the break-even definition: The break even point is the production volume that will make the profit equal to zero.

### How do you calculate the breakeven point?

The calculation is fairly simply. You need to use the following formula:

\[ BEP = \displaystyle \frac{FC}{P - VC} \]Often times, when it comes to the concept of the break even point in accounting, what is considered is the cash sales associated to the break-even point level of sales, instead of the break-even point instead.

Notice from the break even price formula that denominator has \(P - VC\). So what happens when \(P = VC\)? In that case the break-even point is infinity, in which case, the conclusion is that when the price equals the variable cost per unit, then there is no break even point.

### What is a break even analysis?

The idea of breaking even in real life is that I don't lose or win either. And that is exactly the idea behind break-even analysis: you need determine how many units you need to produce so that your profit is 0, so don't lose or win, you just break-even.

So, the break even point corresponds to the number of units you need to sell in order to break even. If you sell less than that, you make a loss, and if you sell more than that, you make a profit.

### Break-even point example

Assume that you own a firm that has a fixed cost of $10,000 (which includes rent, internet, etc). You sell a widget that costs you $1.25 each to produce, and you can sell for $2.50. What would be your break-even point?

In this case the fixed cost is \(FC = 10,000\), the unit variable cost is \(VC = 1.25\), and the sales price is \(P = 2.50\). We need to plug these numbers in the following formula:

\[ \text{Break even point} = \displaystyle \frac{FC}{P - VC} = \displaystyle \frac{10,000}{2.50 - 1.25} = \displaystyle \frac{10,000}{1.25} = 8,000 \text{units} \]Therefore, in order to break even you will need to sell 8,000 units. If you sell less than 8,000 units you will have a loss, and if you sell more than 8,000 units you will have a positive profit.

### Other related financial calculators

Other financial calculators you may be interested in are the net present value calculator and the internal rate of return calculator.

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