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Break Even Calculator

The break-even point is the number of units that you must sell in order to make a profit of zero. You can use this calculator to determine the number of units required to break even. Our online tool makes break-even analysis simple and easy.

Break-Even Analysis Chart

Break even point formula and example.

The Break Even Calculator uses the following formulas:

Total Variable Cost = Expected Unit Sales × Variable Unit Cost

Total Revenue = Expected Unit Sales × Selling Price Per Unit

Q = $40,000 / ($10 − $5) = $40,000 / $5

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MN10668 Budgeting

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Which is the mostly likely purpose of budgeting?

Planning and control of an organisation's income and expenditure

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A business plans to make 15,000 coats per annum, each taking the 1.5 direct labour hours. If the direct labour rate is £8 per hour and a pay rise of 15% is awarded halfway through the year, what is the total annual direct labour budget?

Which of the following statements can be considered to be an advantage of a bottom-up budget?

Uses the knowledge of all staff to build a fair budget

The cheapest method of producing a budget

Reduces the level of budget negotiation between staff

Prevents slack being built into budgets

A crockery company makes china cups and saucers. How much clay would they need to buy if:

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ACCA F3 Depreciation, Sale of non-current assets, Example 4

View ACCA F3 / FIA FFA lectures Download F3 notes

Reader Interactions

June 30, 2018 at 10:11 pm

sir why did we take the loss on sale 1500 on the part where there is no charge of depreciation in the year of sale ?

June 30, 2018 at 10:14 pm

thank you sir got it 🙂

July 1, 2018 at 8:07 am

I am pleased that you have now got it 🙂

June 24, 2018 at 8:20 pm

Hello John. According to your example I have passed mention below entries,

1. (DR) DEPRECIATION EXPENSE 700 (CR) ACCUMULATED DEPRECIATION EXPENSE 700 2. (DR) CASH PROCEEDS 6,500 (CR) DISPOSAL A/C 6,500 3. (DR) DISPOSAL A/C 15,000 (CR) CAR 15,000 4. (DR) ACCUMULATED DEPRECIATION 7,700 (CR) DISPOSAL 7,700 5. (DR) LOSS ON SALE 700 (CR) DISPOSAL 700

Please do correct my entries if i am wrong

Regards SYED.

June 25, 2018 at 7:38 am

They are correct, but why have you typed them out here?

They are all printed in the answers section of the free lecture notes 🙂

May 30, 2018 at 7:58 am

Can you help m on this. Do we subtract ‘scrap value’ from the initial cost of an NCA to find the accumulated depreciation of, lets say 3 yrs, using reducing balance method, to find the profit/loss on disposal?

Thank you in advance.

May 30, 2018 at 8:01 am

Because theres one question in kaplan regarding profit/loss on disposal, and the solution given didnt subtract the scrap value?? I jst wanna be sure 🙂

May 30, 2018 at 5:56 pm

If you watch the previous lectures on depreciation, you will see that we take account of the expected scrap value when calculating depreciation using the straight line method. However, when using the reducing balance method we do not take account of any expected scrap value in the calculation.

June 1, 2018 at 11:09 am

Thanks a lot! Youre definitely an amazing lecturer, not to mention that open tuition is FOC! bless you

June 1, 2018 at 4:43 pm

You are welcome, and thank you for the comment 🙂

December 8, 2017 at 1:10 pm

Sir, I’m sorry but why can’t I find the lecture for example 5 for this chapter? 🙁 can you please help and upload it?

December 8, 2017 at 4:44 pm

I say at the end of this lecture, that I explain revaluations in the lectures on limited companies (because revaluations are only relevant for limited companies – not for sole traders).

August 26, 2017 at 10:28 am

i jusr want to ask that is study material provided by opentutuion will be sufficient to clear paper f3

August 26, 2017 at 4:51 pm

Yes – provided that you watch all of the lectures and that you also buy a Revision Kit from one of the ACCA approved publishers (they contain lots of exam-standard questions to practice, and practice is vital to passing the exam).

August 29, 2017 at 6:35 am

sir sholud i also purchase the books of acca papers or shoud continue with notes and rivision kit

August 29, 2017 at 7:53 am

There are no books just of past ACCA exams. The Revision Kits contain lots of past questions as well as other exam-standard questions.

You only need the notes and a Revision Kit (provided that you are not just using the notes on their own but at watching the free lectures that go with them as well).

September 13, 2017 at 3:49 pm

Hi. your lectures are wonderful and helped me thank you. I am using the revision kits and i couldn’t understand this question, can you please help me to explain….

(The trucks account (at cost) of a business for the year ended 31 December 20×1 was as flow.

20×1 20×1 $ $ 1jan blance 240,000 31 mar disposal account 60,000 30june cash-purchase of van 160,000 31 dec blance 340,000 400,000 400,000

Brought forward accumulated depreciation at 1 January was 115,000.The truck disposed of on 31 March had a carrying value of $ 20,000. The company´s policy is to charge depreciation at 20% per year on reducing balance, and charge a full year´s years depreciation in the year of acquisition and non in the year of disposal). What should be the depreciation charge for the year ended 31 December 20×1 A $68,000 B $57,000 C $53,000 D $21,000

September 14, 2017 at 7:33 am

Please ask this question in the Ask the Tutor Forum, and not as a comment on a lecture.

May 12, 2017 at 12:40 pm

Hi John, would we put any gains from the disposal in the P & L Statement under revenue (but keeping it as a separate category under revenue)? Or in the case of a loss from disposal, put it in the P & L Statement as a disposal expense/loss? Sorry if my question doesn’t make sense, im just getting started with accountancy!

May 12, 2017 at 12:51 pm

Sorry I mean ‘Statement of Financial Position’ not P & L.

May 12, 2017 at 1:38 pm

Opps, i mean SOPL not SOFP. I need to get used to the names of these statements!! Sorry :-O

May 12, 2017 at 2:06 pm

No – you show it under ‘expenses’. If it is a loss then it adds in to the other expenses. If it is a gain then you put brackets round it and it reduced the total of the other expenses. (This is because really there is only a gain or loss because the depreciation had not been ‘perfect’ and so it is in a sense correcting the depreciation expenses in the past.)

November 30, 2016 at 9:53 pm

Hi Mr John, I need your help to solve this question: accounting year end 30th June, it purchased an item of plant on 1 April 2005 at cost of $15000,at the date of purchase, the item of plant and equipment had an estimated useful life to the business of five years and an estimated residual value of $2000’This item of plant was traded in for a replacement item on 30 September 2008 at an agreed valuation of $5000.it has been depreciated at 20 percent per annum on a straight line basis, with a pro rated charge in the year of acquisition and disposal. Calculate profit or loss on disposal of the item of plant.

December 1, 2016 at 6:32 am

You must ask questions like this in the Ask the Tutor Forum, and not as a comment on a lecture. (Also, there must be an answer in the same book in which you found the question, and so you should ask about whatever it is in the answer that you are not clear about – don’t simply expect a full answer to a test question.)

January 3, 2016 at 11:51 am

Can you please tell me where to find correct answers to the questions given in the Notes?

is question 3 is C on page 45? – $ 88 200 CR.

January 3, 2016 at 12:50 pm

If you look at the contents page on the Lecture Notes you will find the answers to tests are listed.

The answer is A. The 88,200 is carried forward to the opposite side so we end up with a debit balance (you should watch the earlier lectures on double entry bookkeeping).

December 2, 2015 at 1:32 am

Sir can you please help me out with this?

At 1 January 2005, Mary has a motor vehicles which cost $15000. On 31 august 2005 she sells a motor vehicle for $5000 which had originally cost $8000 and which had a CV of $4000 at the date of disposal. She purchased a new motor vehicle which cost $10000 on 30 November 2005.

Her policy is to depreciate motor vehicles at a rate of 25%pa on the straight line basis, based on the number of months ownership.

What is the depreciation charge for the year ended 31 December 2005?

December 2, 2015 at 7:17 am

You must ask this question in the Paper F3 Ask the Tutor Forum, and not as a comment on a lecture.

October 21, 2015 at 3:58 pm

question 4.

1 jan 2000 krin bought a machine 70000. estimated useful life 7 years. and a residual of 7000. two years later the useful life was revised to three remaining years and at 31 december 2003 machine was sold for 30000.

what was the profit on disposal? how do you go about this one?

October 21, 2015 at 4:51 pm

Initially, the annual depreciation was (70000 – 7000) / 7 = 9,000 a year.

So the value after 2 years (i.e. the end of 2001) will have been 70,000 – (2 x 9000) = 52,000.

The remaining life is revised to 3 years (and the residual value is still 7000 because we are not told different). So the new depreciation will be (52000 – 7000) / 3 = 15,000 a year.

So….at the end of 2003 (which is 2 more years) the value will be 52000 – (2 x 15000) = 22000.

It was sold for 30000, and so there is a profit on sale of 30000 – 22000 = 8000.

September 17, 2015 at 10:27 pm

Absolutely! This method is a lot easier. Thank you sir

September 17, 2015 at 9:51 am

Kindly shed for more light on the answer for this question sir, The plant and machinery acc at cost of a business for the yr ended 31 Dec 2008 is as follows, Jan 1 balance. 240000 31 March transfer disposal acc 80000 30 June ,cash purchase of plant 160000 31 Dec balance,340000

Depreciation – 20% per annum on straight line basis with proportionate depreciation in the years of purchase and disposal

September 17, 2015 at 10:49 am

You have copied the question wrong – the disposal is 60,000 (not 80,000)

You can get the answer is several ways. If you don’t understand the answer at the back of the lecture notes, then maybe you will find this way easier:

The cost is 240,000 from 1 Jan to 31 March, 3 months. So the depreciation is 3/12 x 20% x 240,000 = 12,000 Then it falls to 180,000 (240,000 – 60,000) and stays at this from 1 Apr to 30 Jun, 3 months, So the depreciation is 3/12 x 20% x 180,000 = 9,000. Then it increases to 340,000 (180,000 + 160,000) and stays at this from 1 Jul to 31 Dec, 6 months. So the depreciation is 6/12 x 20% x 340,000 = 34,000

So the total depreciation is 12,000 + 9,000 + 34,000 = 55,000

October 21, 2015 at 3:52 pm

You are welcome 🙂

November 6, 2015 at 8:20 am

sir, i did not understand why you subtracted 240000- 60000 please explain

November 6, 2015 at 5:41 pm

Because there are disposals of 60.000

July 9, 2015 at 4:09 am

so sir if we had a gain

July 9, 2015 at 8:54 am

If the ‘missing figure’ on the disposal account is on the other side then there is a profit on sale instead of a loss. This appears in the Statement of profit or loss as a negative cost and therefore increases the profit instead of decreases it.

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What is Break-Even Analysis?

What is the break-even analysis formula, break-even analysis example, graphically representing the break-even point, free cost-volume-profit analysis template, download the free template, interpretation of break-even analysis, sensitivity analysis.

• Factors that Increase a Company’s Break-Even Point

How to reduce the break-even point

Additional resources, break even analysis.

The point in which total cost and total revenue are equal

Break-even analysis in economics, business, and cost accounting refers to the point at which total costs and total revenue are equal. A break-even point analysis is used to determine the number of units or dollars of revenue needed to cover total costs ( fixed and variable costs ).

Key Highlights

• Break-even analysis refers to the point at which total costs and total revenue are equal.
• A break-even point analysis is used to determine the number of units or dollars of revenue needed to cover total costs.
• Break-even analysis is important to business owners and managers in determining how many units (or revenues) are needed to cover fixed and variable expenses of the business.

The formula for break-even analysis is as follows:

Break-Even Quantity = Fixed Costs / (Sales Price per Unit – Variable Cost Per Unit)

• Fixed Costs are costs that do not change with varying output (e.g., salary, rent, building machinery)
• Sales Price per Unit is the selling price per unit
• Variable Cost per Unit is the variable cost incurred to create a unit

It is also helpful to note that the sales price per unit minus variable cost per unit is the contribution margin per unit. For example, if a book’s selling price is $100 and its variable costs are $5 to make the book, $95 is the contribution margin per unit and contributes to offsetting the fixed costs.

Colin is the managerial accountant in charge of Company A, which sells water bottles. He previously determined that the fixed costs of Company A consist of property taxes, a lease, and executive salaries, which add up to $100,000. The variable cost associated with producing one water bottle is $2 per unit. The water bottle is sold at a premium price of $12. To determine the break-even point of Company A’s premium water bottle:

Break Even Quantity = $100,000 / ($12 – $2) = 10,000

Therefore, given the fixed costs, variable costs, and selling price of the water bottles, Company A would need to sell 10,000 units of water bottles to break even.

For more information about variable costs, check out the following video:

The graphical representation of unit sales and dollar sales needed to break even is referred to as the break-even chart or cost-volume-profit (CVP) graph. Below is the CVP graph of the example above:

Explanation:

• The number of units is on the X-axis (horizontal) and the dollar amount is on the Y-axis (vertical).
• The red line represents the total fixed costs of $100,000.
• The blue line represents revenue per unit sold. For example, selling 10,000 units would generate 10,000 x $12 = $120,000 in revenue.
• The yellow line represents total costs (fixed and variable costs). For example, if the company sells 0 units, then the company would incur $0 in variable costs but $100,000 in fixed costs for total costs of $100,000. If the company sells 10,000 units, the company would incur 10,000 x $2 = $20,000 in variable costs and $100,000 in fixed costs for total costs of $120,000.
• The break even point is at 10,000 units. At this point, revenue would be 10,000 x $12 = $120,000 and costs would be 10,000 x 2 = $20,000 in variable costs and $100,000 in fixed costs.
• When the number of units exceeds 10,000, the company would be making a profit on the units sold. Note that the blue revenue line is greater than the yellow total costs line after 10,000 units are produced. Likewise, if the number of units is below 10,000, the company would be incurring a loss. From 0-9,999 units, the total costs line is above the revenue line.

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As illustrated in the graph above, the point at which total fixed and variable costs are equal to total revenues is known as the break-even point. At the break-even point, a business does not make a profit or loss. Therefore, the break-even point is often referred to as the “no-profit” or “no-loss point.”

The break-even analysis is important to business owners and managers in determining how many units (or revenues) are needed to cover fixed and variable expenses of the business.

Therefore, the concept of break-even point is as follows:

• Profit when Revenue > Total Variable Cost + Total Fixed Cost
• Break-even point when Revenue = Total Variable Cost + Total Fixed Cost
• Loss when Revenue < Total Variable Cost + Total Fixed Cost

Break-even analysis is often a component of sensitivity analysis and scenario analysis performed in financial modeling . Using Goal Seek in Excel, an analyst can backsolve how many units need to be sold, at what price, and at what cost to break even.

Factors that Increase a Company’s Break-Even Point

It is important to calculate a company’s break-even point in order to know the minimum target to cover production expenses. However, there are times when the break-even point increases or decreases, depending on certain of the following factors:

1. Increase in customer sales

When there is an increase in customer sales, it means that there is higher demand. A company then needs to produce more of its products to meet this new demand which, in turn, raises the break-even point in order to cover the extra expenses.

2. Increase in production costs

The hard part of running a business is when customer sales or product demand remains the same while the price of variable costs increases, such as the price of raw materials. When that happens, the break-even point also goes up because of the additional expense. Aside from production costs, other costs that may increase include rent for a warehouse, increases in salaries for employees, or higher utility rates.

3. Equipment repair

In cases where the production line falters, or a part of the assembly line breaks down, the break-even point increases since the target number of units is not produced within the desired time frame. Equipment failures also mean higher operational costs and, therefore, a higher break-even.

In order for a business to generate higher profits, the break-even point must be lowered. Here are common ways of reducing it:

1. Raise product prices

This is something that not all business owners want to do without hesitation, fearful that it may make them lose some customers.

2. Outsourcing

Profitability may be increased when a business opts for  outsourcing , which can help reduce manufacturing costs when production volume increases.

Every company is in business to make some type of profit. However, understanding the break-even number of units is critical because it enables a company to determine the number of units it needs to sell to cover all of the expenses it’s accrued during the process of creating and selling goods or services.

Once the break-even number of units is determined, the company then knows what sales target  it needs to set in order to generate profit and reach the company’s financial goals.

How the 3 Financial Statements are Linked

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• Fill in the blue boxes with the required numbers.
• Click on the 'Calculate' button to calculate.

The sample answer and solution will be shown below the calculator.

I want to calculate

Interest (i), principal ( p ), interest rate ( r ), duration ( t ), sample solution & answer.

The following are the sample solution and answer for your reference.

Ways to Use

Using this calculator.

You can use this calculator in many ways. Here are some ideas:

• Use it to check your homework answers.
• Use the sample solution as a guide to help you to solve questions that you are not sure about.

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