How to Calculate Break Even in Excel

What is Break Even?

Break even is the point where the total revenue of a business equals the total cost of producing and selling its products or services. At this point, the business is neither making a profit nor a loss. It is important to know the break even point for any business, as it helps to determine the minimum sales volume required to cover the costs and the potential profit margin for higher sales.

How to Calculate Break Even in Excel?

There are different ways to calculate break even in excel, but one of the simplest methods is to use the following formula:

Break Even = Fixed Costs / (Unit Price - Unit Variable Cost)

This formula assumes that the fixed costs, unit price, and unit variable cost are constant and known. Fixed costs are the expenses that do not change with the level of output, such as rent, salaries, insurance, etc. Unit price is the amount of money that the business charges for each unit of product or service sold. Unit variable cost is the amount of money that the business spends for each unit of product or service produced, such as raw materials, labor, packaging, etc.

To use this formula in excel, follow these steps:

• Enter the fixed costs, unit price, and unit variable cost in separate cells, such as A1, B1, and C1 respectively.
• In another cell, such as D1, enter the formula =A1/(B1-C1) and press enter. This will give you the break even point in terms of units.
• To convert the break even point from units to dollars, multiply it by the unit price. For example, in cell E1, enter the formula =D1*B1 and press enter. This will give you the break even point in terms of dollars.

Example of Break Even Calculation in Excel

Let’s say you run a bakery that sells cupcakes. You have the following information:

• Fixed costs: $2,000 per month
• Unit price: $5 per cupcake
• Unit variable cost: $2 per cupcake

Using the formula above, you can calculate the break even point in excel as follows:

• Enter the fixed costs, unit price, and unit variable cost in cells A1, B1, and C1 respectively.
• In cell D1, enter the formula =A1/(B1-C1) and press enter. This will give you the break even point in units, which is 667 cupcakes.
• In cell E1, enter the formula =D1*B1 and press enter. This will give you the break even point in dollars, which is $3,335.

You can also create a table to display the break even calculation in excel, as shown below:

This means that you need to sell at least 667 cupcakes per month to cover your costs and break even. If you sell more than 667 cupcakes, you will make a profit. If you sell less than 667 cupcakes, you will incur a loss.