Break even- a financial indicator, the value of which determines the required sales volume for the stable operation of the enterprise without making losses and profits.

The economic meaning of the break-even point

Essentially, the break-even point is the so-called critical production volume. When the break-even point is reached, profits and losses are equal to zero.
The break-even point is an important value in determining the financial position of a company. The excess of production and sales volumes above the break-even point determines the financial stability of the company.

Algorithm for calculating the break-even point

To calculate the break-even point, we will need to divide the costs by nature:

• Fixed costs are production costs that do not depend on production volumes (sales volumes).
• Variable costs are costs that increase with each additionally produced (additionally sold) unit of product.

Consider the following notation:

Vyr - revenue
Real - sales (volume, pcs.)
PostZ - fixed costs
PerZ - variable costs
Price - price
SPerZ - average variable costs
TB - break-even point
TBnat - break-even point in physical terms (units of production, pcs.)

Formula for calculating the break-even point (in monetary terms):

TB = Vyr * PostZ / (Vyr - PerZ)

Formula for calculating the break-even point (in physical terms):

TBnat = PostZ / (Price - SPerZ)

Example of calculating the break-even point

Initial data:

Exp = 100,000
Real = 50
PostZ = 15,000
PerZ = 25,000

Calculated data:

Price = Vyr / Real = 100,000 / 50 = 2,000
SPerZ = PerZ / Real = 25000 / 50 = 500

TB= Vyr * PostZ / (Vyr - PerZ) = 100,000 * 15,000 / (100,000 - 25,000) = 20,000 rubles.
TBnat= PostZ / (Price - SPZ) = 15,000 / (2000-500) = 10 pieces.

The break-even point is shown on the chart at the intersection of the gross cost line with the revenue line. At this point, the company covers all costs and makes zero profit.

Lines of fixed and variable costs are shown on the graph for reference in order to see when and how one or another type of cost affects the volume of gross costs.

In a general sense, the graph reflects the change in all previously described indicators (revenue, fixed and variable, as well as gross costs) depending on production volumes (horizontal percentage scale).

Calculation of break-even point in Excel (with graph!)

Using MS Excel and our calculation table, you can quickly and clearly calculate the break-even point and build a graph of the break-even point. You will only need to enter 4 initial values, the table will calculate everything else!

In any area of ​​entrepreneurial activity, businessmen are faced with the problem of calculating losses and profits for existing projects.

In other words, when the invested money begins to bring real profit. To do this, the break-even point formula is used.

A correctly calculated break-even point formula can show how effective the investment project under consideration will be and how soon it will pay off, what is the risk of losing the invested money. An entrepreneur or the company's top management must decide whether to invest in an investment project or whether it should be postponed, and calculating the break-even level plays a key role here.

Break-even point: what is it?

The break-even point (formula) shows the required level of production and subsequent sales of products to cover all waste and costs.

In other words, this is the volume of products sold at which the firm's profit is zero.

The coefficient is measured in monetary and natural equivalents.

In practical terms, the indicator serves as an excellent indicator of the size of production and sales of products (services), where the initial costs of the company are fully covered by incoming cash flow. The coefficient is used by company managers in the process of creating and analyzing a future project.

The higher the company's break-even level, the higher the indicator of its solvency and, as a result, financial stability. If the break-even ratio increases, this indicates the presence of structural problems within the company that have a negative impact on profit making.

Features and benefits of use

• The ability to calculate how much revenue can be reduced so as not to be at a loss in the future. It is especially important if there is an increase in actual revenue over estimated revenue.
• Ability to identify structural problems of the company associated with temporary changes in the break-even level.
• The ability to determine the prospects of a new investment project, as well as the time frame within which it can fully pay off.
• Ease of use.
• Calculation of the break-even level allows us to identify the interdependence of the cost of products with the volume of their sales to end consumers. Makes it possible to calculate the most favorable price threshold for the products offered.

The use of the break-even point formula is most effective in markets characterized by a low level of competition, as well as stable demand from consumers.

Globalization of all levels of markets creates variable demand for domestic products.

Application practice

The break-even point is used for various purposes.

The most used areas, as well as the purposes for applying this coefficient, are external and internal users.

External users:

• State. An assessment is made of the sustainability of development of the audited enterprise.
• Investors. Analysis of the effectiveness of the development strategy used.
• Creditors. Analysis of the solvency of the proposed investment project.

Internal users:

• Head of the production process. Identification of the minimum level of production of goods.
• Shareholders (owners). Determining the level of profitability of the company.
• Director of Sales. Analysis of future expenses, the influence of competition, finding the optimal price ratio, drawing up a sales plan.

The practical use of the break-even level allows you to make effective management decisions, determine the financial stability of the company, and also determine the critical production indicator.

Formula

Break-even point in monetary (value) terms (profitability threshold), formula:

Break-even ratio = FC/KMR

• Where, FC – waste that does not depend on the production process (rent of premises, tax deductions, salaries for administrative staff).
• KMR – cost of goods sold.

Based on the calculation results, the critical volume of revenue can be determined at which the level of loss reaches zero.

Break-even point in physical terms. To identify the break-even level in physical terms, the following indicators should be used:

• Variable Costs (AVC);
• Cost of a unit of products sold (P);
• Fixed costs per volume of output (FC).

The calculation is carried out using the following formula: FC/(P–AVC)

Based on the results of the calculation, the critical volume of products sold in physical terms will be obtained.

Profit from sales is the final result of the company's activities. This article details the formulas for calculating profit and applying the results to improve your profitability ratio.

Indicator usage model

The following assumptions are always used in the coefficient calculation process:

• The costs of production and its volume have a linear relationship.
• The production capacity indicator is constant, the structure of the manufactured product is unchanged.
• Variable costs, as well as the cost of production, do not change.

Inventories of finished products in warehouses are insignificant and do not distort the final break-even level of the company.

Formula calculation steps

There are three key stages to effectively determine a company's break-even point:

1. Collection of a complete data package for its scrupulous analysis. Estimation of production volumes, profits, sales and losses.
2. Determination of the volume of fixed and variable expenses. Identification of the safety zone.
3. Estimation of the required sales volumes of products to ensure the financial stability of the company in the future.

Essentially, the task becomes to determine the maximum minimum levels of financial stability of the company for the time calculated in the analysis.

Identifying tools to increase the boundaries of the safety zone.

Before you begin calculating the break-even level, it is important to understand which company expenses are classified as fixed and which expenses are variable.

Variable expenses include wages of workers, technological needs of the enterprise, purchase of semi-finished products, purchase of components, energy

Constant expenses of companies are rent, additional wages for workers (managerial and administrative level), depreciation charges, etc.

An example of calculating the break-even point for a company

Let's give an example of how to calculate the break-even point. To demonstrate, we use the calculation of break-even for an enterprise.

Many small and medium-level firms specialize in producing a homogeneous product, with a characteristically identical cost.

Therefore, it is most rational for a company to make calculations in physical terms. The cost of the product is four hundred rubles. Fixed and variable costs are shown in the table.

According to the calculation using the formula, the break-even point will be:

VER = 300,000 / (400 – 320) = 3750 pieces.

Consequently, the company needs to create at least 3,750 units of products to reach the 100% payback level. Exceeding the specified level will mean that the company will make a real profit.

The break-even point is quite easy to calculate if a full range of data is available. But it is important to take into account that a number of assumptions are used in the calculations. In particular:

• The company maintains the previous price threshold even when sales volumes increase, although in reality, especially over a long period of time, this assumption is unacceptable.
• In the process of selling manufactured products, there is always a certain percentage of balance. It is not in the example.
• The break-even formula was used in relation to a single product category. If in reality there will be several product categories, the structure should remain constant.

Expenses are presented unchanged. In reality, as sales levels increase, expenses will also increase.

Conclusion

In conclusion, we can say that the break-even point is an extremely important coefficient in matters of planning sales volumes and production of goods. The break-even point allows you to determine the exact relationship between profit and waste, as well as make a decision on the issue of pricing policy.

The range of applications of the break-even point is quite wide. The formula is actively used in all areas of business activity, especially in matters of planning an investment project, as well as decision-making at the strategic level.

Video on the topic

Hello! Today we’ll talk about the break-even point and how to calculate it.

Any person who decides first of all thinks about making a profit. When running a business, there are production costs - these are all the costs of manufacturing and marketing products. They are subtracted from the total sales revenue in monetary terms, obtaining a positive (profit) or negative (loss) result. For the successful functioning of an enterprise, it is necessary to know the boundary of the transition of revenue into profit. This is the break-even point.

What is the break-even point

The volume of production at which all income received can only cover total costs - this is the break-even point(from English break-even point - point of critical volume).

That is, this is the minimum amount of revenue in monetary terms or the volume of products produced and sold in quantitative terms, which only compensates for all production costs.

Reaching this point means that the company is not operating at a loss, but is not yet making a profit. The result of the activity is zero. With each subsequent unit of goods sold, the company makes a profit. Other names for this term: profitability threshold, critical production volume.

Why do you need to know the break-even point?

The value of this indicator is important for assessing the current financial condition of the enterprise, as well as for economic planning for the future. The break-even point allows you to:

• Determine the feasibility of expanding production, dealer network, mastering new technologies and types of products;
• Assess solvency and financial stability, which is important for company owners, investors and creditors;
• Monitor changes in indicators over time and identify bottlenecks in the production process;
• Calculate and plan a sales plan;
• Determine the acceptable amount of revenue reduction or the number of units sold so as not to go to a loss;
• Calculate the impact of changes in price, production costs and sales volume on the financial result.

What data is needed to calculate the break-even point

To correctly calculate the indicator, you need to understand the difference between fixed and variable costs.

And also know the following information:

1. Price of 1 unit of products or services (P);
2. The volume of products produced and sold (in the classical calculation model) in physical terms (Q);
3. Revenue from products sold (B). To calculate the threshold in physical terms, this indicator is not necessary;
4. Fixed costs (Fc.) are production costs that do not depend on the volume of production. They do not change for a long time.

These include:

• Salaries and insurance premiums of engineering and technical workers and management personnel;
• Rent for buildings, structures;
• Tax deductions;
• Depreciation deductions;
• Payments on loans, leases and other obligations.

5. Variable costs(Zper) are production costs that increase or decrease depending on the increase or decrease in the production of goods or the volume of services provided. The value of the indicator can vary widely, instantly reacting to any changes in the company’s activities.

These costs include:

• Cost of raw materials, components, spare parts, semi-finished products;
• Salaries and insurance contributions of key production workers and personnel working on piecework;
• Electricity, fuels and lubricants (fuels and lubricants), fuel;
• Fare.

The division of all costs into fixed and variable is conditional and is used in the classical model for calculating the break-even point. The specifics of a number of economic entities imply a more precise allocation of costs into separate types according to economic meaning.

In particular, production costs may additionally be:

1. Conditionally permanent. For example, warehouse rent is a fixed component, while the costs of storing and moving inventory are a variable component;
2. Conditional variables. For example, the payment for depreciation (wear and tear) of capital equipment is a constant value, and the cost of planned and routine repairs is a variable value.

Cost accounting systems at different enterprises differ (for example, standard costing, direct costing, variable costing, etc.). There is a division of variable costs into individual ones for each product, a division of fixed costs into fixed and individual ones for each product, etc.

This article will examine in detail the classic model for calculating the break-even point for one product, and also provide an example of calculation with several types of goods.

Formula for calculating the indicator

Using the mathematical method, the break-even point (abbr. BEP) is calculated both in monetary and in kind terms. It all depends on the characteristics of a particular enterprise. When calculating according to the classical model involving one product (or several - then average data are taken), assumptions are taken into account for a number of factors:

1. Fixed costs within a given production volume remain unchanged (this level is called relevant). This also applies to variable costs and prices;
2. Product output and the cost of finished products increase or decrease linearly (directly proportional);
3. Production capacity is constant over a given calculation interval;
4. The product range does not change;
5. The effect of inventory size is insignificant. That is, the amount of work in progress has minor fluctuations and all produced products are released to the buyer.

This economic indicator should not be confused with the payback period of the project. It shows the time (months, years) after which the company will begin to receive profit from its investments.

Break-even point in monetary terms

The calculation formula will show the minimum amount of revenue that will cover all costs. The profit will be zero.

Calculated as follows:

In the denominator, the difference between revenue and variable costs is the contribution margin (MR). It can also be calculated for 1 unit of production, knowing that revenue is equal to the product of price and volume:

B = P*Q,

MD for 1 unit. = P — Zper. for 1 unit

To determine the break-even point using another formula, find the marginal income coefficient (Kmd):

The final value in both formulas will be the same.

Break-even point in physical terms

The calculation formula will show the minimum sales volume to cover all production costs with zero profit. Calculated as follows:

Each subsequent unit of goods sold above this critical volume will bring profit to the enterprise.

With a known value of VERNAT. VERDEN can be calculated:

VERDEN. = VERNAT. *P

How to calculate break-even point in Excel

It is very convenient to calculate the break-even point in Microsoft Office Excel. It is easy to set the required formulas between all the data and build a table.

Table compilation procedure

First, you need to create cost and price indicators. Let's assume that fixed costs are 180 rubles, variable costs are 60 rubles, and the price for 1 unit of goods is 100 rubles.

The value in the columns will be as follows:

• We fill out the production volume ourselves, in our case we will take the interval from 0 to 20 pieces;
• Fixed costs =$D$3;
• Variable costs =A9*$D$4;
• Gross (total) costs = B9 + C9;
• Revenue (income) =A9*$D$5;
• Marginal income = E9-C9;
• Net profit (loss) = E9-C9-B9.

These formulas in cells must be carried out throughout the entire column. After filling in the values ​​for production volume, the table will take the following form:

Starting from the 5th unit of production, net profit became positive. Before this, revenue did not cover the total (total) production costs. The profit in this case is equal to 20 rubles, that is, formally this is not quite the correct break-even point. The exact value of volume at zero profit can be calculated:

That is, the break-even point is mathematically calculated at a production volume of 4.5 units. However, the economist takes into account 5 pieces. and the revenue value is 480 rubles. is considered the break-even point, since it produces and sells 4.5 pcs. product is not possible.

Let's add 2 more columns to the table with the calculation of the safety margin (margin of safety, margin of safety) in monetary terms and in percentages (KB den. and KB%). This indicator indicates the possible amount of reduction in revenue or production volume to the break-even point. That is, how far the enterprise is from the critical volume.

Calculated using the formulas:

• Vactual (plan) – actual or planned revenue;
• VTB – revenue at the break-even point.

In this example, the actual revenue value is taken. When planning sales volume and profit, they use the value of planned revenue to calculate the required safety margin. In the table, these columns will be calculated as follows:

• Safety edge in rub. = E9-$E$14;
• Safety edge in % = H10/E10*100 (calculation is carried out starting from a production volume of 1 piece, since division by zero is prohibited).

A safety margin value above 30% is considered a safe limit. In our example, production and sale of 8 pcs. goods and more means a stable financial position of the company.

The final table will look like:

Algorithm for constructing a graph

For clarity, let's build a graph. Select Insert/Scatter Plot. The data range includes gross (total) costs, revenue, and net profit. On the horizontal axis there will be production volume in pcs. (it is selected from the values ​​of the first column), and along the vertical – the sum of costs and revenue. The result will be three slanted lines.

The intersection of revenue and gross costs is the break-even point. It corresponds to a net profit value of 0 (in our example, 20 rubles for a product quantity of 5 pieces) horizontally and the minimum required revenue value to cover total costs vertically.

You can also build a more detailed graph, which includes, in addition to the above indicators, fixed, variable costs and marginal income. To do this, the specified rows are sequentially added to the data range.

How to use a ready-made table in Excel

To calculate the break-even point, you just need to substitute your initial data, and also enter the production volume values ​​in the first column. If there are a lot of them, then to speed up the work you can write in cell A10, for example: =A9+1 and move this formula down. Thus, the interval between volume values ​​will be 1 piece. (you can enter any number).

• Download a ready-made excel file to calculate the break-even point

Example of calculating the break-even point

For example, let’s take an entrepreneur selling watermelons in summer stalls. He has one product, the price is the same in different parts of the city. Watermelons are purchased in bulk in the southern regions and delivered for sale to central Russia. The business is seasonal, but stable. The initial data is as follows:

It is necessary to determine the minimum acceptable volume of watermelon sales and the threshold revenue value to cover all costs.

The procedure for calculating using the mathematical method

The price of 1 watermelon is taken as average, since they all have different weights. These fluctuations can be neglected. To calculate the break-even point in physical terms, we use the well-known formula:

To calculate the break-even point in monetary terms, you need to know the number of watermelons sold per month and the amount of variable costs for this volume:

• Q per month = 36000/250 = 144 watermelons,
• Zper. for monthly volume = 130*144 = 18,720 rub.

The first two values ​​give a break-even point with zero profit, but the volume of watermelons sold will be 91.67 pieces, which is not entirely correct. The third value is calculated based on the critical sales volume of 92 watermelons per month.

Current monthly revenue and sales volume are above the break-even point, therefore the entrepreneur is working with a profit.

Additionally, we determine the size of the safety edge:

A level above 30% is considered acceptable, which means the business is planned correctly.

Calculation procedure by graphical method

The break-even point can also be calculated graphically, without preliminary calculations. To do this, the volume of output in pieces is plotted along the horizontal abscissa axis, and the amount of revenue and total costs (sloping lines) and fixed costs (straight line) is plotted along the vertical ordinate axis. Next, they draw by hand or build a diagram on a computer based on the original data.

As a result of constructing the graph, the break-even point will be at the intersection of the revenue and total cost lines. This corresponds to a sales volume of 91.67 watermelons and revenue of 22,916.67 rubles. The shaded areas show profit and loss areas.

The given calculation model for one product is easy to analyze and calculate the break-even point. Well suited for companies with a stable sales market without sharp price fluctuations.

However, the above calculation has the following disadvantages:

• Seasonality and possible fluctuations in demand are not taken into account;
• The market may grow due to the emergence of progressive technologies, new marketing moves;
• Feedstock prices may change;
• For regular and “large” buyers, discounts are possible.

Thus, the data for calculating the break-even point are considered in conjunction with many factors and other economic indicators.

Break-even planning for the enterprise

Based on the obtained values ​​of the break-even point, an analysis of the current market conditions is carried out and the most significant factors influencing it are identified. Planning further work involves forecasting production costs and competitive market prices. This data is used to calculate the production and break-even plan, which is part of the company's overall financial plan. For the successful operation of the enterprise, compliance with the approved goals is monitored.

Consecutive stages of break-even planning:

1. Analysis of the current state of affairs in the company and sales . Strengths and weaknesses are identified and determined taking into account internal and external factors. The work of supply and sales services, the level of management at the enterprise, and the rationality of the production process are assessed. Among external factors, the market share controlled by the company, the activities of competitors, changes in consumer demand, the political and economic situation in the country, etc. are taken into account;
2. Forecast of future prices for manufactured products, taking into account the assessment of all factors from paragraph 1 . An acceptable markup range is planned. Alternative options for selling to new markets or restructuring the enterprise to produce similar products are explored in the event of an unfavorable situation in the current market;
3. Fixed, variable costs and production costs are calculated . The volume of work in progress at all stages of production is planned. The need for fixed and working capital and the sources of their acquisition are formed. Additional possible expenses for loans and other obligations are also taken into account in production costs;
4. The break-even point is calculated . The required size of the safety edge is determined. The more unstable external factors are, the greater the margin of safety should be. Next, the volumes of production and sales of goods at the safety edge level are calculated;
5. Planning the company's pricing policy . Prices for products are determined that will allow achieving the required sales volume. The break-even point and safety margin are recalculated once again. If necessary, paragraphs 3 and 4 are repeated in order to find reserves for reducing costs in order to achieve the required safety margin values;
6. Adoption of the final break-even and sales plan divided by periods . The data is approved at the critical volume point.
7. Break-even control , divided into several components: control of all expense items, total cost, sales plan, receipt of payments from customers, etc. The enterprise should always have an understanding of how the current financial situation corresponds to the planned break-even level.

Calculation example for a store

Using the example of a store selling several types of goods, let’s consider a solution to a multi-product problem. These are musical instruments and related products: electric guitar (A), bass guitar (B), sound amplifier (C), acoustic guitar (D). The store has fixed costs, as well as individual variable costs for each type of product. They are purchased from different suppliers and bring in their own amount of revenue.

The initial data is as follows:

The store is quite large, but the structure of revenue by type of product does not change significantly. The range and prices for them are different, so it is more rational to calculate the profitability threshold in monetary terms. To solve this problem, we use formulas and methods from direct costing, which assume a range of break-even points for such a case:

Kz. lane – coefficient of the share of variable costs in revenue.

In the following table we calculate it for each type of product and the total for the entire store. We will also calculate marginal income (Revenue - individual variable costs) and its share in revenue:

After calculating Kz. lane For the entire store, the average break-even point will be:

Now let's calculate this indicator using the most optimistic forecast. It is called marginal descending ordering. The table shows that the most profitable products are A and B.

Initially, the store will sell them and the total marginal income (210+170=380 thousand rubles) will almost cover the fixed costs (400 thousand rubles). The remaining 20 thousand rubles. will be received from the sale of product B. The break-even point is equal to the sum of revenue from all listed sales:

The most pessimistic sales forecast is the marginal ordering in ascending order. Initially, goods D, C and B will be sold. The marginal income from them (125+30+170=325 thousand rubles) will not be able to cover the store’s fixed costs (400 thousand rubles). The remaining amount is 75 thousand rubles. will be received from sales of product A. The break-even point will be equal to:

Thus, all three formulas gave different results. Essentially, optimistic and pessimistic forecasts provide an interval of probable break-even points for the store.

Additionally, we calculate the safety margin in monetary terms and as a percentage based on the average break-even point:

Although the store is operating at a profit, the safety margin is below 30%. Ways to improve financial performance are to reduce variable costs and increase sales for goods D and C. It is also necessary to check fixed costs in more detail. Perhaps there will be reserves for reducing them.

Example of calculation for an enterprise

As an example, let’s take an enterprise producing household solvents with a volume of 1 liter. The company is small, prices rarely change, so it is more rational to calculate the profitability threshold in physical terms (number of bottles).

The initial data is as follows:

The calculation will be as follows:

The resulting value is very close to the actual volume (3000 pcs.).

Additionally, we calculate the safety edge in pieces (using a formula similar in monetary terms) and as a percentage:

Thus, the company operates on the verge of break-even. Urgent measures are needed to improve the financial situation: a review of the structure of fixed costs, perhaps the salaries of management personnel are too high. It is worth understanding in detail the costs that form variable costs. The primary direction to reduce them is to find new suppliers of raw materials.

What is the break-even point - the theoretical aspect + data is needed to calculate it + 3 popular ways to calculate it.

It is quite difficult to plan and carry out entrepreneurial activities without knowledge of the basics of economics.

Any businessman, no matter what it is or an LLC, will be faced with concepts such as income, expenses and profit.

And this is generally a hundredth part of what he must understand to successfully run his business.

For this reason, today we will talk about what is break-even point, and why is it needed?

What is the break-even point: a little theory

Break-even point (BPU)- this is one of the key concepts in microeconomics, which shows how much goods need to be sold (and not just produced) in order to equalize income with expenses, namely, not to make a profit and not to incur losses.

Thus, it is a critical indicator that forecasts sales volumes to cover gross production costs.

As soon as an enterprise crosses the profitability threshold (this is another name for the break-even point), it begins to make a profit, and, conversely, if it does not reach it, it becomes unprofitable.

The value of this indicator reacts to changes in the prices of raw materials (variable costs), the wage fund for administrative personnel (fixed costs) and many other circumstances, which we will examine throughout the article.

The importance of calculating the break-even point is due to the fact that it can be used to:

• determine the optimal cost of selling manufactured products;
• calculate the time frame for a new project to pay off (the moment when revenues exceed costs);
• monitor changes in the indicator in order to identify problem areas in the production and sales process;
• analyze the financial condition of the enterprise;
• find out how changes in prices or expenses will affect the resulting revenue.

Break-even point - practical aspect

The next step in analyzing the question of what the break-even point is is its calculation.

But before that, we suggest you familiarize yourself with when it would be advisable to do this:

• the amount of variable costs and value remain unchanged over a specific period of time;
• it is possible to accurately determine not only fixed costs, but also variable costs per unit of production;
• variable costs and volume of production have a linear relationship;
• the operating conditions of the enterprise are stable;
• there are practically no leftovers of finished products (i.e., what is produced is equal to what is sold).

Necessary data to calculate the break-even point

To calculate the break-even point you will need to know these indicators:

Let's take a closer look at these indicators:

Fixed expenses- these are those that do not depend on the volume of production, i.e. the enterprise bears them in any case.

These include:

• salaries (including contributions to social funds) of management personnel;
• rental of premises;
• depreciation of equipment.

1. Variable expenses- these are those that depend on the quantity of products produced.

   These include:

   • purchase of raw materials;
   • wages (plus contributions to social funds) of working personnel;
   • communal payments;
   • fuel and transportation costs.
2. Marginal income can be calculated as the difference between revenue (TR) and total variable costs (TVC) or between price (P) and unit variable costs (AVC).

Method 1. Using the formula.

Break even can be calculated in physical and monetary terms.

In the first case, we will find out how many units of goods need to be sold in order to break even, and in the second, how much revenue received will recoup the costs incurred.

Calculation of TBU in natural equivalent:

BEPnat = TFC / (P-AVC)

BEPden = BEP nat * P

For clarity, let's look at a specific example:
Variable costs for the production of one product (AVC): 100 rubles;
Selling price (P): 180 rubles.
Substitute the original values ​​into the formula:
BEP nat = 40,000 / (180-100) = 500 pieces.
Having the obtained result, you can calculate at what gross income the enterprise will go to zero:
BEPden = 500 * 180 = 90,000 rubles.

Calculation of TBU in monetary terms:

BEPden = (TR* TFC) / (TR-TVC)

KMR for 1 unit = MR per 1 unit. /P

Based on the obtained values, we obtain:

BEPden = TFC / KMR

Again, to clarify the above formulas, consider them using an example:
We have the following data:
Fixed expenses of the enterprise (TFC): 40,000 rubles;
Variable costs (TVC): 72,000 rubles;
Revenue (TR): 120,000 rubles.
Substitute the values ​​into the formula:
BEPden = (120,000*40,000) / (120,000-72,000) = 100,000 rubles
MR = 120,000-72,000 = 48,000 rubles
KMR = 48,000 / 120,000 = 0.4
BEPden = 40,000 / 0.4 = 100,000 rubles

Thus, it can be seen that the BEP values ​​calculated using the two formulas are equal.
If an enterprise sells its goods for 100,000 rubles, then it will not suffer losses.
As for the marginal income coefficient, it shows that every ruble of revenue received from above will bring 40 kopecks of profit in this case.

As for calculating BEP for several products, the situation here is as follows:

1. First, the marginal revenue for each individual product is calculated.
2. Then the share of marginal income in revenue and its coefficient are determined.

3. BEPden = TFC / (1- K TVC) ,
   where K TVC is the coefficient of variable costs in revenue (TVC / TR).

To make it clearer what’s what, we suggest that you familiarize yourself with the table:

Method 2: Using Excel.

Not using modern technologies in economic calculations is stupid. Large enterprises that work with large quantities of several goods cannot do without them.

So, to make calculations in a popular spreadsheet, you need to enter basic data:

Then a table is built, which will be gradually filled with the calculated data. And based on its results, it will be possible to see at what volume of goods sold the company will pass the loss line:

Using this principle, we fill out the table, based on the fact that the company produces and sells several units of goods:

So, in our case, it turns out that when selling 4 units of goods, the company receives zero profit. The proceeds will be 480 rubles.

And having already sold the fifth piece, a profit equal to 50 rubles is made.

As you can see, it is enough to build such a simple spreadsheet into which you need to enter the initial data, and the calculation of the break-even point will always be at hand.

The advantages of using Excel to calculate the break-even point:

• you can make any changes related to price or costs - the table will instantly recalculate the results;

When making a forecast, you can adjust the values ​​of the initial indicators to find the optimal sales volume.

For example, you want to achieve profit on the third unit of goods. To do this, you can immediately raise its price and see what changes.

Thus, having set the price at 150 rubles, the table was immediately recalculated and produced new data, which showed the current value of the break-even point.

Method 3. Drawing a graph.

To build a graph, we need all the indicators that we calculated in the table.

For the resulting linear diagram to be correct, it is necessary to highlight the following data:

• sales volume - X axis;
• gross (fixed, variable) costs, revenue, net profit - Y axis.

At the intersection of income and gross expenses (variables + constants) there will be a break-even point.

Moving the perpendicular down we will find its natural value, and to the left we will find the monetary equivalent.

Moreover, the chart clearly demonstrates the area of ​​losses and profits.

Let's return to our example.
Having a table, you can easily build a graph that will show the desired indicator. Again, as you make changes, the chart will react, showing the new results.


The only drawback of this method is that the graph will not indicate the exact number of goods. Of course, you can increase the scale to understand what value the intersection point tends to, but still it is calculations that will give a specific indicator.

Calculating the break-even point is extremely important at the stage.

Once again about how to do this, but from first-hand experience:

Conclusions about the break-even point

Based on the information described above, we can say that the break-even point is:

• this is a great way to figure out how much you need to sell so as not to go into the red;
• it is quite simple (if you know the exact initial indicators);
• does not always correspond to the actual operating conditions of the enterprise, because its calculation assumes a “utopia” in running a business (one that is not affected by anything).

But despite the fact that this indicator works well under ideal conditions, every entrepreneur should be able to use it in analyzing the financial condition of their business.

Useful article? Don't miss new ones!
Enter your email and receive new articles by email

The break-even point is a formula for success, a kind of magical point, after passing which you can say with relief that you “survived.” I hope everyone has calculated it, and not just relying on luck...

The success of any company is measured by the size and growth of its profits. Profit growth is naturally associated with an increase in sales or production volumes.

There is, perhaps, no such amount of profit and sales, having reached which it is possible to say: “Enough, no more needed.” The company’s “appetites” grow as it develops: first we develop our native region, then the neighboring ones, then the country to the very outskirts, and finally, before us (hurray!) are global market places. And at any of these stages, the company is driven by the logical desire to sell as many products as possible and get maximum profit. But for its successful development, it is necessary not only to calculate how much it will earn, but also to clearly understand what the smallest sales volume is needed to break even.

Break-even point - what is it?

Earning a profit means selling enough products to compensate for all the costs incurred and still have some “useful remainder” after that.

• An optimist, planning a profit, will ask the question: “How much do you need to sell to earn a good profit?”
• A pessimist will more cautiously ask: “How much do you need to sell so as not to get stuck in debt and go broke?”

These questions come together at one point - in an attempt to determine the sales value below which the company will begin to experience financial losses, and above which it will begin to earn. This minimum possible sales volume, covering all the company’s costs for the production and sale of goods, without bringing either losses or profits, is called the break-even point.

The position of the break-even point for a business owner or investor plays a vital role. After all, you need to know exactly when the project will start to pay off, and whether it will pay off at all, what the level of risk will be when investing money.

The break-even point of a business is the sales volume when the entrepreneur’s profit “passes” zero and he begins to make a profit, that is, income finally begins to exceed expenses. It is measured in physical terms - pieces, tons or liters, or in monetary terms - rubles.

Calculating the break-even point shows how much product needs to be sold or how much work needs to be done for income to begin to cover expenses. When passing through the break-even point, the company finally begins to receive net income, and until it is reached, it operates at a loss.

Constant monitoring of the break-even point is important for calculating the financial stability of the enterprise. For example, an increase in its value indicates that the company has problems that prevent it from generating the necessary profit. In addition, changes in prices, turnover, enterprise growth and many other factors do not contribute to its stable fixation.

Determining the company's break-even point makes it possible to:
• understand whether it is possible to invest funds and money in this project, calculating the time and sales volume when income exceeds expenses.
• identify problems in the company if the break-even point begins to increase over time;
• calculate the amount of the required change in sales volume when the price of a product changes and vice versa, without incurring losses;
• determine how much it is possible to reduce revenue in the competition so as not to remain “in the red”;
• if the break-even point decreases, determine what helped this and direct efforts to consolidate the result.

Some earn good money from this business. Try it too.

Cold calling phone numbers is a popular way to expand your customer base. How not to scare off a potential client and increase the effectiveness of negotiations, read.