Enter the fixed costs ($), the sales per unit ($), and the variable cost per unit ($) into the Break Even Sales Calculator. The calculator will evaluate and display the Break Even Sales. 

Break Even Sales Formula

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

BES = FC / (SPU - VC)
  • Where BES is the Break Even Sales
  • FC is the fixed costs ($) 
  • SPU is the sales per unit ($) 
  • VC is the variable cost per unit ($) 

To calculate the break even sales, divide the fixed costs by the difference between the sales per unit and the variable cost per unti.

How to Calculate Break Even Sales?

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

Example Problem #1

  1. First, determine the fixed costs ($).
    1. The fixed costs ($) is given as 500.
  2. Next, determine the sales per unit ($).
    1. The sales per unit ($) is calculated as: 30.
  3. Next, determine the variable cost per unit ($).
    1. The variable cost per unit ($) is found to be: 20.
  4. Finally, calculate the Break Even Sales using the formula above: 

BES = FC / (SPU – VC)

Inserting the values from above yields: 

BES = 500 / (30 – 10) = 25

FAQ

What is the significance of calculating Break Even Sales for a business?

Calculating Break Even Sales is crucial for a business as it helps determine the minimum amount of sales needed to cover all fixed and variable costs. Understanding this figure allows businesses to set sales targets, make informed pricing decisions, and evaluate the financial viability of new products or services.

How can a business reduce its Break Even Sales point?

A business can reduce its Break Even Sales point by decreasing fixed costs (e.g., negotiating lower rent or seeking more efficient equipment), lowering variable costs per unit (e.g., finding cheaper suppliers or improving production efficiency), or increasing the sales price per unit, provided that the market demand remains stable.

Are there any limitations to the Break Even Sales calculation?

Yes, there are limitations to the Break Even Sales calculation. It assumes that all units produced are sold at the same price, that fixed and variable costs remain constant, and does not account for changes in market demand or competition. Additionally, it does not consider the impact of financing costs or taxes on profitability.