The point where your total revenue and total expenses are equal is called the break-even point. In business break-even point analysis is very important to calculate the profitability. It is a point where business is not gaining and losing and the net amount is zero. For calculating the break-even point the formula is (total fixed cost/ total / selling price – variable cost). You have to compare your cost and revenue at break-even point analysis. Many business calculating the break-even point analysis to see the current condition of the business. The information which is required by the business for break-even analysis is fixed cost of making commonly sold products and variable cost and net profit of the product. This information must be correct because it is very useful to conduct break even analysis. The managers and owner use this analysis for evaluating the business performance. They measure cost of products and sale of products to the analysis of break-even point. The break-even point analysis also tells the company how much they have to sell to cover the cost, how much business have to earn profitable. What is the bottom line of cost and sale? If you are the owner or manager of any company and need to calculate break-even point for analysis, we have a very smart excel sheet with formula for you all. It will help to do break-even point analysis. You just have to download it without wasting your time and enter amounts according to your requirement.
How to calculate the break-even point analysis?
The break-even point analysis is not as easy if you don’t know about formula and here we will provide you complete help to calculating break-even point analysis. You have to follow the guidelines as bellow:
- First of all you will use an excel sheet because it is easy for calculating the numeric values on Microsoft excel.
- Add the cost of a number of units of sales on the sheet for calculating the unit price.
- After that provide the information about payback period “the time required to cover break-even”.
- Add the fixed cost and variable cost on the sheet. Use the formula “total fixed cost/ total / selling price – variable cost”
- The break-even analysis template analyzes the overall relationship between business variable cost, fixed cost and spent revenue.
Benefits of break-even point analysis:
The break-even point analysis is very useful for business operations. It helps to cover the cost from profit. It calculates how much investment needed by business for future use. The break-even point analysis reduces the risk of investment for investors when they already know about the break-even point analysis. The break-even point also useful for calculating the point when a business enters new products in the market and earn maximum profit. It also provides the information that the new products generate profit and which products are sold at low cost. The point where the break-even point highest, it indicates the more sell offering. The business will achieve their goals and objective with the help of break-even point analysis. The break-even point helps to know about payback investments and debt management. The business will get their optimum cost of capital when use break-even point analysis to measure the performance of the business.
Download this Break Even Analysis Template
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