Enter the operating expenses ($) and the gross margin (%) into the calculator to determine the Break Even Revenue. 

Break Even Revenue Formula

The following formula is used to calculate the Break Even Revenue. 

BER = OE / (GM/100)
  • Where BER is the Break Even Revenue ($)
  • OE is the operating expenses ($) 
  • GM is the gross margin (%) 

To calculate the break even revenue, divide the operating expenses by the gross margin.

How to Calculate Break Even Revenue?

The following example problems outline how to calculate Break Even Revenue.

Example Problem #1:

  1. First, determine the operating expenses ($). In this example, the operating expenses ($) is given as 324.
  2. Next, determine the gross margin (%). For this problem, the gross margin (%) is given as 30.
  3. Finally, calculate the Break Even Revenue using the equation above: 

BER = OE / (GM/100)

The values given above are inserted into the equation below:

BER =324 / (30/100) = 1080 ($)

FAQ

What is the significance of understanding Break Even Revenue in business?

Understanding Break Even Revenue is crucial for businesses as it helps determine the minimum amount of sales needed to cover all operating expenses. This knowledge aids in financial planning, setting sales targets, and assessing the viability of business strategies.

How can a change in operating expenses or gross margin affect Break Even Revenue?

A change in operating expenses or gross margin directly impacts the Break Even Revenue. An increase in operating expenses or a decrease in gross margin raises the Break Even Revenue, indicating that higher sales are needed to cover costs. Conversely, a decrease in operating expenses or an increase in gross margin lowers the Break Even Revenue, making it easier for a business to become profitable.

Can Break Even Revenue analysis be applied to new business ventures or products?

Yes, Break Even Revenue analysis is particularly useful for new business ventures or product launches. It helps entrepreneurs and managers estimate the sales required to cover costs and achieve profitability, aiding in risk assessment and financial planning before market entry.