Break Even Calculator – ABC Company

Break Even Calculator – Description

This break even calculator has been designed to calculate your break even units and sales for a specific product or group of products. It will also calculate sales in units and dollar amount which you would need if you wanted to reach a particular target profit.

Enter your variables in the unshaded cells of the break even calculator. The shaded cells are read–only formulas.

Before you start using this break even calculator, organize your information and divide your costs between those that are variable and those that are fixed. Please refer to the definitions tab for further explanation of the difference between the two.

The result of the calculation performed by the break even calculator will appear in the 4 lines near the top of your screen. Their cells are light green.

Once you enter all your variables into the break even calculator, press the Compute button to see the results. When you are ready to analyze your next scenario or set of assumptions, hit the Reset button and enter your new set of data.

Definitions used in the break even calculator:

Product Name. Name of the product you are examining with this break even calculator.

Period under analysis. Period of time your analysis using this break even calculator will cover. This time period will have to be reflected in the fixed costs you will enter below. The result will tell you how many units you will need to sell in this time period to break even. Again, only your fixed costs will be affected by the time period under the analysis in this break even calculator. Your per unit variable costs and your unit selling price will be unaffected, of course.

For example, if you pay 10% commission to your sales people, that will stay the same, no matter whether we are looking at one month or a six month period. But your rent will certainly be different for those two time periods. The same goes for all your other fixed costs.

Of course, if your unit price or your commission schedule changes, or if you want to analyze different scenarios, you will have to enter those new variables for each separate calculation you will run. Just make sure that your fixed costs always correspond to the time period you select.

Unit Selling Price. Price you are setting for one unit of this product. Examine more than one scenario.

Targeted Net Income Before Taxes (NIBT). This is an added level of profitability, after you achieve your break even. Enter the level of earnings before income tax expense you would like to analyze. The break even calculator will compute the number of units and sales in dollars needed to achieve those earnings. See further below.

Break Even # of Units. Number of units you will need to sell to make a profit of zero.

Break Even Sales. Sales required to make a profit of zero expressed as a dollar amount.

# of Units Needed to Reach Targeted NIBT. Number of units you will need to sell to make a target profit indicated above.

Sales Amount Needed to Reach Targeted NIBT. Dollar amount of sales you will need to generate to make a target profit indicated above.

Variable costs. Costs directly related to the sales and influenced by the sales, i.e. the more you sell, the higher these costs.

Unit Variable Costs – Amounts. Variable costs per unit of your product expressed as dollar amounts.

Unit Variable Costs – Ratios to Sales. Variable costs per unit of your product expressed as ratios (percentages) to sales.

Unit Contribution Margin. The difference between the unit sales price and variable costs expressed as a dollar amount.

Unit Contribution Margin Ratio to Sales The difference between the unit sales price and variable costs expressed as a percentage to sales.

Fixed costs. Other costs required to produce your product. These are called fixed, because their levels do not change as production increases or decreases.