Break-Even Point In Excel

The break-even point is where our total cost equals the total revenue earned. So we can call this situation “no profit, no loss.” In graphics, the break-even point is where revenue total and total cost curves meet.

All the business models estimate their revenue and expenditure for the year, quarter, and month to know their break-even point in the business. This article will show you how to calculate the break-even analysis in Excel.

So, break-even is, Revenue – Total Costs = 0

In economics, we call the break-even point "the point of indifference." This analysis informs the management of the minimum revenue required to cover its expenses.

The calculation of break-even points is different from industry to industry. So, for example, if the company is a product selling company, we will consider the number of units sold. On the other hand, if the company is a services company, it will be a different strategy.

• The break-even point in Excel is where the total cost equals the total revenue earned. It is also known as "no profit, no loss." The break-even point is graphically where the total revenue and total cost curves intersect.
• It is helpful for businesses in the production industry.
• It is the intersection of the revenue and total cost curves. It is calculated using the formula FC / (SP – VC) to identify the units needed to sell to cover fixed costs.

Let us learn how to use break-even analysis in Excel.

Example #1 - Using Goal Seek

A Co. has prepared 58 electronic devices. It has incurred a total fixed cost of $8 per unit and a variable cost of $6 per unit. This company does not know what price they need to sell these 58 devices to achieve the break-even point.

We need to construct this scenario in an Excel worksheet. If you do not know how to make it, follow the image formulas.

For finding the break-even point, our profit amount should be zero.

• We must open the "GOAL SEEK" option from the "DATA" tab under "What-If-Analysis" in Excel.

• Now, we can see below the "Goal Seek" window.

• "Set Cell" is which cell we need to modify the value. In this case, we need to alter the "Profit" cell, so we must select the B10 cell.

• "To Value" means what should be the "Set Cell" values. In this case, we need the "Profit" cell as zero. So, we must enter the value as 0.

• The last option is "By changing cell." "By changing which cell," we need the profit value as 0. In this case, we need to find what should be the selling price to achieve the break-even point. So, select the B7 cell.

• We will click on "OK." Then, "Goal Seek" can find the "Selling Price" required to achieve the break-even point.

So, A Co. has to sell the electronic devices at $14 per unit to achieve the break-even point.

Similarly, using the same "Goal Seek" analysis, we can find the selling price required to profit $5,000.

• Again, open the "Goal Seek" window and select the "Profit" cell for the "Set cell" option, and "To Value" will be $5,000. "By Changing cell" will be the "Selling Price" cell, the B7 cell.

• It may give the required "Selling Price" to achieve $5,000 as profit.

So, to achieve a profit of 4,000, A Co. must sell at $114 per unit.

Example #2 - Using A Break-Even Table

Ms. Alisa is an entrepreneur who produces notebooks, and her costing model is as follows.

• Fixed Cost = $4,000
• Variable Cost = $8 per unit
• Selling Price = $25 per unit

She wants to know how many units she must produce to achieve the break-even point. So let us help Ms. Alisa through our Excel break-even analysis.

• Now, we must construct a table like the one below.

• For "Fixed Cost," we will give a cell link to B2 and make it an absolute reference.

• For "Variable," we must enter the formula as No. of Units * Variable Cost Per Unit.

• For “Total Cost,” add “Fixed + Variable.”

• For "Revenue," arrive at the formula as No. of Units * Selling Price Per Unit.

• For "Profit," we must enter the formula as Revenue – Total Cost.

• Now, we will drag the formula of all the cells to 10 rows.

• For "No. of Units," we should start filing from 100 to 300.

From the G13th cell, "Profit" shows positive numbers, so to achieve a break-even point, Ms. Alisa needs to produce approximately 236 units.

• Now, let us create a break-even chart for the same data. First, we must select the "Total Cost," "Revenue," and "Profit" column.

• Then, we will insert a line chart with markers.

So, the point where the curves of “Revenue & Total Cost” intersects is called the break-even point.

Example #3

For example, assume that the fixed cost is $20,000. The variable expense is $4 per unit, and unit sales price is $10.

Now, let us find break even analysis using formula.

Select cell B4, and enter the formula =B3/(B1-B2)

Press Enter key.

We can see the result as shown in the below image.

Likewise, we can find the results.

• Break-even is where the business stands at no profit, no loss scenario.
• Break-even analysis is best suited for the production industry.
• The formula to find break-even in units’ is FC / (SP – VC).
• The intersection point of revenue and total cost curves is called a break-even point.

This article is a guide to Break-Even Analysis in Excel. Here we discuss how to do Excel Break-Even Analysis along with examples & downloadable template. You may also look at these useful functions in Excel: -

• Breakeven Analysis Examples
• Break-Even Point in Accounting
• BEP Formula
• Break-Even Sales Calculation