Question 1

How do I calculate the break-even point?

Accepted Answer

Break-even point is calculated as: Fixed Costs / (Price per Unit - Variable Cost per Unit). The difference between price and variable cost is the contribution margin. Our calculator handles this automatically - just enter fixed costs, variable cost per unit, and price per unit.

Question 2

What's the difference between fixed and variable costs?

Accepted Answer

Fixed costs don't change with sales volume (rent, salaries, insurance). Variable costs change with each unit produced (materials, direct labor per unit). Understanding this distinction is crucial for accurate break-even analysis.

Question 3

What is contribution margin?

Accepted Answer

Contribution margin is the amount each unit contributes to covering fixed costs and generating profit. It's calculated as Price per Unit - Variable Cost per Unit. A higher contribution margin means fewer units needed to break even.

Question 4

How do I calculate units needed for a target profit?

Accepted Answer

Use Target Profit mode in our calculator. Enter your desired profit amount, and the calculator shows how many units you need to sell to achieve that profit after covering all costs. Formula: (Fixed Costs + Target Profit) / Contribution Margin per Unit.

Question 5

How can I lower my break-even point?

Accepted Answer

Lower break-even by: 1) Reducing fixed costs, 2) Increasing price per unit, 3) Reducing variable cost per unit, or 4) A combination. Our calculator lets you experiment with different scenarios to see how each change affects your break-even point.

Break-Even Calculator - Business Break-Even Point & Target Profit Analysis

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