Break-Even Point Formula
The break-even point is where total revenue equals total costs — no profit, no loss. Knowing this helps you set sales targets and pricing strategy.
Break-Even Point Formula
BEP (units) = Fixed Costs / (Selling Price - Variable Cost per Unit)
Where:
- FC = Total fixed costs (rent, salaries, etc.)
- SP = Selling price per unit
- VC = Variable cost per unit
Step-by-Step:
- 1
List fixed costs
Rent, salaries, insurance, etc. — costs that don't change with sales volume.
- 2
Find contribution margin
SP - VC = how much each unit contributes to covering fixed costs.
- 3
Divide
BEP = FC / (SP - VC).
Worked Examples:
Coffee shop
Fixed Costs: ₹3L/monthPrice/cup: ₹150Cost/cup: ₹50
Result: 3,000 cups/month
3,00,000 / (150-50) = 3,000 cups. That's ~100 cups/day.