Break-even point

Break-even point is the level of sales at which your total revenue equals your total costs. At this point you make zero profit and zero loss. It helps you set sales targets, price products, and control costs.

You can work it out using fixed costs and contribution (selling price minus variable cost). Divide fixed costs by contribution per unit to find break-even units, or divide fixed costs by the contribution margin percentage to find break-even sales value. For multiple products, use a weighted average contribution based on your sales mix.

Two common ways to express break-even are:

• Units: how many items or hours you must sell to cover all costs.
• Sales value: the sales amount you need, useful when prices vary or you sell services.