It is also possible to calculate how many units need to be sold to cover the fixed costs, which will result in the company breaking even.
If it generates fewer sales, there will be a loss. If it generates more sales, the company will have a profit. In this breakeven point example, the company must generate $2.7 million in revenue to cover its fixed and variable costs. Its breakeven point is $2.7 million ($1 million ÷ 0.37). The first pieces of information required are the fixed costs and the gross margin percentage.Īssume a company has $1 million in fixed costs and a gross margin of 37%. The information required to calculate a business’s BEP can be found in its financial statements. Business Breakeven = Gross Profit Margin Fixed Costs Dividing the fixed costs by the contribution margin will provide how many units are needed to break even. This can be converted into units by calculating the contribution margin (unit sale price less variable costs). The breakeven formula for a business provides a dollar figure that is needed to break even.
