Breakeven is an important indicator of identifying whether a business is worth the effort. It can be in terms of the number of units or sales value. It refers to the level at which the costs are completely covered by the earned income. In other terms, it is the zero-profit point. A breakeven point shows the minimum level of production required for the survival of an organization, as a product needs to cover its variable expenses, yet should contribute toward the fixed cost.
What is a breakeven calculator sheet?
A breakeven calculator sheet is an excel spreadsheet, that has the in-built formulas for the calculation of a breakeven point. It provides an easy way of calculation and lets the user do the work on one sheet through one simple calculator. It is designed in a way that different fields are assigned for the different components, in which the data values are entered for the individual products.
The field for the breakeven point then automatically calculates the breakeven point in units and in dollar value. The breakeven in units is calculated as fixed cost /contribution margin. Further, if the breakeven is to be calculated in dollars, the calculator multiplies the breakeven units found with the selling price per unit.
What are the advantages of a breakeven calculator sheet?
There are many benefits of this calculator, such as:
- Easy calculation of the breakeven point for different products.
If an organization has several products, each of which is contributing to the fixed expenses, their breakeven points need to be calculated, so that the organization would know the number of units to be produced of each product to reach at least the no-profit level. It is important for the organization’s products to cover the variable costs associated with them as well as they have to contribute toward the fixed expenses.
- Indicates the minimum required quantity.
As the breakeven point indicates the minimum required quantity of production, the raw materials, labor, and other resources can be ordered and planned accordingly to produce the required number of units.
- Aids in decision making.
Many relevant decisions can be made based on the calculation of the breakeven point. The organization can analyze if it wants to continue producing a certain product or not.
What are the main components of a breakeven calculator sheet?
Usually, the main components in this calculator sheet are:
- Selling price per unit.
- Variable cost per unit.
- Contribution margin per unit.
- Fixed cost.
- Breakeven point in units.
- Breakeven point in dollars.
Usually, the breakeven is calculated using the above information and formula. However, there are other ways of calculating it as well. The components and formulas would be different in those calculator sheets.
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