Break-even calculator
How much has to be sold before anything is earned, and how far above that point the business is.
Free, with no sign-up Worked out in your browser The working shown, line by line
The answer
| Contribution | |
| Selling price a unit | 500.00 |
| Less variable cost a unit | -300.00 |
| Contribution a unit | 200.00 |
| Contribution to sales | 40% |
| Break-even | |
| Fixed costs | 5,00,000.00 |
| Units Fixed costs ÷ contribution a unit | 2,500 |
| In sales value | 12,50,000.00 |
| Margin of safety | |
| Units sold | 4,000 |
| Above break-even by 37.5% | 1,500 |
| Profit at that volume | 3,00,000.00 |
- Fixed costs are fixed only within a range. Doubling the volume usually moves them.
Not statutory. Marginal costing, as management accounting teaches it.
How it is worked out
Each unit sold earns its contribution: the selling price less the variable cost of making it. The fixed costs are met out of contributions, so the break-even point is the fixed costs divided by the contribution a unit.
In sales value, the break-even point is the fixed costs divided by the contribution to sales ratio - the share of every rupee of sales left after variable costs.
The margin of safety is how far actual sales are above break-even: how much they could fall before the business makes a loss.
Worked example: Fixed costs of ₹5 lakh, a price of ₹500 and a variable cost of ₹300
Each unit contributes ₹200, so break-even is 2,500 units or ₹12.5 lakh of sales. At 4,000 units the business is 1,500 units, or 37.5%, above it.
Questions
What is the break-even formula?
Break-even units = fixed costs ÷ (selling price − variable cost a unit). Break-even sales = fixed costs ÷ contribution to sales ratio.
What is the contribution margin?
The selling price less the variable cost of a unit. It is what each sale contributes towards the fixed costs first, and to profit once they are covered.
What is the margin of safety?
Actual sales less break-even sales, often shown as a percentage of actual sales. The larger it is, the further sales can fall before there is a loss.
The same answer, on every client, with the working paper written for you
KiyoTool has the rest of the costing set - contribution, cost-volume-profit, target cost, variances and a cost sheet per product - and a tool that turns a list of costs into a cost sheet with the margin on each product. It runs on Windows, offline, and your clients' books never leave the machine.