Formula
Break-even Point = Fixed Costs ÷ (Selling Price per Unit – Variable Cost per Unit)
Calculation Example
If a company has $100,000 in fixed costs, sells a product for $50 with a variable cost of $30, the break-even point is: 100,000 ÷ (50 – 30) = 5,000 units
Data Source
Financial reports, cost structures, accounting records
Tracking Frequency
Quarterly, Annually
Optimal Value
Should be as low as possible to reduce financial risk.
Minimum Acceptable Value
A high break-even point indicates high fixed costs, requiring more sales to cover expenses.
Benchmark
Varies by industry; manufacturing often has a higher break-even point than services
Recommended Chart Type
Bar chart (to compare break-even points), Line chart (to track trends)
How It Appears in Reports
Displayed in financial planning reports to assess profitability thresholds.
Why Is This KPI Important?
Helps businesses determine the minimum sales volume required to avoid losses.
Typical Problems and Limitations
Does not account for changes in fixed costs, price fluctuations, or demand variability.
Actions for Poor Results
Reduce fixed costs, increase sales price, optimize variable costs.
Related KPIs
Revenue, Cost of Goods Sold (COGS), Gross Profit Margin
Real-Life Examples
A startup reduced its break-even point by switching to a subscription model, ensuring steady revenue.
Most Common Mistakes
Focusing only on break-even without considering profit margins.
