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Break-Even Analysis Spreadsheet

Are you making a profit?

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File Size: 25 KB
Date Added: Sep 2002
Requirements: Microsoft Excel 97 and higher

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Description
How much do I have to sell to reach my profit goal?  How will a change in my fixed overhead costs affect my net income?  What price should I charge to cover my costs and allow for a planned amount of profit?  Help improve your business decision making using break-even analysis.

Break-even analysis is the use of a simple mathematical formula to determine the sales level at which your business neither incurs a loss nor makes a profit.  In other words the point where total expenses equals net sales revenue.

Net sales revenue is all sales revenue less any returns and allowances.  Expenses are classified as either fixed or variable costs.  Fixed costs are typically expenses you pay out regularly and doesn't change with a change in sales volume.  Examples of fixed costs are general office expenses, depreciation, rent and utilities.  Variable costs are those expenses that change with the unit level of either production or sales.  Examples of variable expenses are direct materials used, direct labor costs, sales commission and billing expenses.  

If some expense items have both a fixed and variable nature then try to determine which portion is fixed and which is variable and split the costs accordingly.

Break-even analysis focus only on the short run and the break-even point of sales often change over time.  For this reason it is important to regularly recalculate the break-even points for your products or services.

Break-even analysis can help you determine your selling price.  You can then also determine your break-even amount of sales by multiplying the selling price per unit by the break-even number of units.

Break-even analysis also applies to service businesses.  For service businesses substitute billing hour units for number of products to determine the number of billing hours necessary to make a profit.

Included on this page is an Excel spreadsheet application to calculate the break-even point for the product that you are selling.  Enter the selling price per product, variable production and distribution costs and fixed monthly overhead.  The marginal revenue per product, breakeven point of sale per month and break-even monthly turnover will automatically be calculated.

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Customer Reviews

Kathi Bedmorz, USA

"Thank you for all your patience.  Can you tell that I'm a neophyte at this?  I've been working your spreadsheet and have found it most helpful (and you, too!)"

Copyright 2014 Francois Andlau  -  all rights reserved