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Break even analysis can be used by a business to calculate the revenue or number of unit sales needed in order to produce a net income of zero. At this point, the gross margin (sometimes referred to as contribution margin) is equal to the operating expenses of the business.
A variation of break even analysis can be used to work out the revenue or sales units needed to reach a target profit level.
A business is said to break even when it’s profit is zero. It is useful to be able to calculate the sales needed for a business to break even, and to do this the Break Even Point Formula can be used.
The Break Even Calculator Excel sheet, available for download below, uses the break even formula to calculate break even point for you by inserting values for sales, variable costs, and fixed costs.