How to Calculate the Break-Even Point

Oaktree Blog – The break-even point, or Break Even Point (BEP), is the point at which a business’s total revenue equals its total costs. In other words, at the break-even point, the company makes neither a profit nor a loss. Knowing how to calculate the break-even point is essential for entrepreneurs to determine when their freight forwarding business or other business will start to make a profit.

What Is BEP?

The Break Even Point (BEP) is the point at which total revenue equals total costs. You can calculate the BEP using two common methods: based on units or based on sales value.

BEP in Units: The BEP in units can be calculated using the formula:

BEP Units = Fixed Costs / Selling Price per Unit − Variable Costs per Unit

Here, fixed costs are costs that do not change with the number of products made, while variable costs change as production volume changes.

BEP in Sales Value: The BEP in sales value can be calculated using the formula:

BEP Sales Value = Fixed Costs / 1 – (Variable Cost per Unit / Selling Price per Unit​)

​How Do You Calculate the Break-Even Point?

“How do you calculate the break-even point?” or “What’s the way to calculate the break-even point?” is a common question many entrepreneurs ask, especially those just starting a business. To calculate the break-even point, you need to know a few basic components, such as fixed costs, variable cost per unit, and selling price per unit.

For example, if your business has fixed costs of Rp 10.000.000, a variable cost per unit of Rp 20.000, and a selling price per unit of Rp 50.000, the calculation is as follows:

BEP Units:

BEP Unit = 10.000.000 / 50.000 – 20.000 = 333,33 unit

This means you need to sell around 334 units of product to break even.

BEP Sales Value:

BEP Nilai Penjualan = Rp10.000.000 / 1 – (Rp20.000 / Rp50.000) = Rp16.666.666,67

So, you need to achieve sales of Rp 16.666.667 to break even.

What Needs to Be Calculated to Determine the Break-Even Point?

To determine the break-even point, you need to calculate three key components:

• Fixed Costs: Fixed costs are costs that do not change regardless of production volume, such as rent, employee salaries, and utility costs.
• Variable Costs: Variable costs change with the amount produced, such as raw materials and direct labor costs.
• Selling Price per Unit: This is the price at which you sell your product to consumers.

By calculating these three components, you can determine how many units you need to sell or the total sales value you need to reach to ensure your business does not make a loss.

Conclusion

Calculating the break-even point is a crucial step in business management. By understanding and calculating the BEP, you can plan your sales strategy and set realistic targets.

Ensuring your business is on the right track and starting to make a profit is key to long-term success. We hope this article helps answer your questions about how to calculate the break-even point and why it matters for your business’s long-term viability.