How To Calculate Break Even Sales Revenue

Formula to calculate break even sales.

How to calculate break even sales revenue. It is useful to know the break even sales level so that management has a baseline for the minimum amount of sales that must be generated in each reporting period. Calculating the breakeven point is a key financial analysis tool used by business owners. Break even sales is the dollar amount of revenue at which a business earns a profit of zero. While calculating break even sales you are required to review all of your financial expenses.

Small business owners can use the calculation to determine how many product units they need to sell at a given price. The contribution margin per unit can be calculated by deducting variable costs towards the production of each product from the selling price per unit. In this way you can determine your sales target. In this way you can determine all the hidden costs.

To decide revenue targets. Fixed costs 210 000 c s ratio contribution sales 1 700 000 7 700 000 17 77 or 0 22 break even. According to the cost accountant last year the total variable costs incurred add up to be 1 300 000 on a sales revenue of 2 000 000. Formula to calculate break even point bep the formula for break even point bep is very simple and calculation for the same is done by dividing the total fixed costs of production by the contribution margin per unit of product manufactured.

Let us take the example of a company that is engaged in the business of lather shoe manufacturing. Break even sales formula example 1. Using the example for the break even of units the break even revenue would be as follows. Once you calculate break even sales then you can choose how much revenue you need to generate to stay profitable.