Break-even point

How to calculate break-even point


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Basic data example

Let us suppose that to produce service unit it is necessary to spend $15.3. Raw material cost is included here, and also other costs which depend on production quantity.

Meanwhile, fixed production costs (leasing of premises, wage fund, and other costs which don’t depend on production quantity) are $15342.46 in the accounting period.

The release price of $22.3 is set by us.

After pressing the "Show Result" button the diagram with costs lines will be shown. The place where the lines cross is called "break-even poin (profitability point)" — here sale proceeds of goods fully cover expenses on their production.

Examples for different kinds of business

Attention! Here there is no any claim on the data completeness and accuracy, only the directions for further independent investigation.

Break-even point for a tire fitting shop

Fixed costs: leasing of premises and equipment (or its amortization), salary of employees, advertising.

Variable costs: as a rule it is electric power.

Calculation peculiarities: there are almost no variable costs, and it is rather difficult to calculate accurately those that exist (for example, power consumption calculating on a typical operation).

Break-even point for a hotel

Fixed costs: leasing or amortization of a building and required equipment, salary of employees, a fixed part of electric power costs.

Variable costs: food for a restaurant, household chemicals for a laundry and cleaning, one-time sets in the rooms (soap, shampoo, slippers), electric power.

Calculation peculiarities: Seasonality, perhaps, the strongest factor. Because of it, it is necessary not simply exceed break-even point, but gain considerable profit to compensate winter time-out.


 

Questions and answers

  • When pressing the button nothing happens. What to do?
    The calculator may not operate in some browsers (approximately 5% of all visitors). If when pressing the button nothing happens, or the page is renewed without display of the diagram — try in other browser.
  • And can there be more examples of break-even point calculation?
    Yes, it can. Write to feedback, we will add.