For any business, understanding the break-even point is essential in order to understand a product’s profitability. Knowing this information allows business owners to understand how much they need to sell in order to make a profit, or if the product is even profitable to begin with. Calculating the break-even point can be a difficult and time-consuming process.
Fortunately, with the advent of technology, there is now an easier way to calculate it – an online break even calculator. This break even calculator is an efficient and effective way to quickly assess the profitability of a product or service and can be used by business owners and entrepreneurs of all sizes.
A break-even analysis shows how much you need to sell in order to cover your costs. It is especially useful if the products/services that you sell have costs associated with them (costs of materials, labor, utilities, etc). The cost of buying materials for your product is an additional cost that is generated by every product you sell. So, the more you sell, the higher your expenses will be.
Cost associated with producing an additional unit.
The sum of all costs required to produce any product. This amount does not change as production increases or decreases.
The number of units that are expected to be sold.
Price you will be able to receive per unit.
The product of units produced and variable unit cost (example 10 units at $5 variable cost produces a total variable cost of $50).
Sum of fixed costs and variable costs.
Product of price and expected sale unit sales (example 10 units at $10 equals $100 total revenue).
Total revenue minus total costs.
Number of units required to sell to make a profit of zero.