# Break Even Point Calculator

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Instructions:
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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.

### First of all, what is a break point?

In finance, a break point is where revenue equals the cost, so then the company "breaks" even (that is where the "break" comes from).

Usually, a break point is measured either in units or in dollars. So, for example, you find the number of units that are needed for the revenue to cover the costs. You can also find the value of sales in dollars you need to break even.

### How do you calculate the break-even point?

The calculation is fairly simple. 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 .