CALCULATE

CALCULATE

uses fixed business costs (e.g., salary, rent, building machinery), vari- able unit costs, and sales price per unit to calculate the number of units needed to sell to break- even. We can also adjust price-points and recompute the needed sales volumes at different prices. Simply enter fixed business costs, variable unit costs, and sales price.

Using this calculator, we will understand a method of how to balance fixed costs with gross profit.

It is necessary to follow the next steps:

- Enter the fixed business costs. The value must be positive;
- Enter the variable unit costs. The value must be positive;
- Enter the sales price per unit. This value should be greater than the value of the variable unit costs;
- Press the ”Calculate” button to make the computation;

The break-even units is determined by the following formula

Break-even quantity = Fixed costsSales price per unit − Variable cost per unit

Total revenue is

Total Revenue = Sales Price per Unit × Break-even quantity

Total variable costs is

Total Variable Costs = Variable Unit Costs × Break-even quantity

The average cost per unit is

Break even quantity = Total Revenue × Break-even quantity

where fixed costs are costs that do not change with varying output, sales price per unit is the selling price (unit selling price) per unit, and variable cost per unit is the variable costs incurred to create a unit.

Break-even calculator makes break-even analysis fast and easy. It is very useful because it helps the business find out how many units need to be sold to cover the business costs. This value is called the break even point. The break-even point allows a company to know when it, or one of its products, will start to be profitable. If a business’s revenue is below the break even point, i.e. if the value of the sales price per unit is less than the value of the variable unit costs, then the company is operating at a loss. If it’s above, then it’s operating at a profit.

We want to find out how much we make on every unit. For instance, assume that we havespent $7000 for our business. If we buy a unit for $50 and sell for $70, our profit per item is $20. By dividing fixed costs by the profit on every unit, we obtain how many units need to sell, $7000 / $20 = 350 units. Total cost or revenue and total variable costs are: 350 × $70 = $24,500,and 350 × $50 = $17,500, respectively.

The Break Even Calculator and example calculation (work with steps) would be very usefulfor every company (or person) to understand how changes in costs (both variable and fixed).The results obtained with the calculator would also help to analyze financial needs.