Breakeven Analysis in
Excel
Breakeven analysis in Excel using
the variables
like contribution margin, fixed costs and variable cost is quick and
easy.
A company is supposed to break even when the total expenses equals the
total revenues. It can also be defined as the point where the net
profit is zero, i. e. the company has neither made any profits nor
incurred any loss.
We have also calculated the
breakeven point
using: break even point = fixed cost / contribution margin per unit
And contribution (per unit) =
selling price
(per unit)  variable cost (per unit)
Terms used in the
BreakEven Analysis:
Unit Price:
The amount of money charged to the customer for each unit of a product
or service.
Unit Sales:
Number of units of the product projected to be sold over a specific
period of time.
Variable Unit Cost:
Costs that vary directly with the sales and production of one
additional unit. Example, commission on sales.
Fixed Cost:
The sum of all costs required
to produce the
first unit of a product. Example,
administration costs.
Total
Variable Cost:
The product of unit sales and variable unit cost.
(Unit Sales * Variable Unit Cost )
Total
Cost:
The sum of the fixed cost and total variable cost for any given level
of production and sales.
(Fixed Cost + Total Variable Cost )
Total
Revenue:
The product of expected unit sales and unit price.
(Unit Sales * Unit Price )
Net
Profit (or Loss):
Total Revenue  Total Costs
Break even analysis depends on the
following
variables:
 The fixed production costs for a
product
 The variable production and sales
costs for a
productThe product's unit price
 The product's expected unit sales
Another way to look at the
breakeven point is
that it is the point at which your product stops costing you money to
produce and sell, and starts to generate a profit for your company.
References:
About Breakeven
