Part 2. MM4XL Tools > 2. Analytical Tools > Business Formulas > mmBEP, Break-Even Point

Business Formulas

mmBEP, Break-Even Point

Category: Reporting > Finance

The break-even point for any business activity is defined as the level of sales at which neither a profit nor a loss is made on that activity that is, where Total Revenues equal Total Costs. Provided that a company sells its goods at a price per unit that is greater than its variable cost per unit, the sale of each unit will make a contribution toward covering some portion of fixed costs. That contribution can be calculated as the difference between price per unit (revenue) and variable cost per unit. On this basis, break-even constitutes the minimum level of sales at which total contribution fully covers fixed costs.

Business analysis formulas for Excel. Marketing tool for professionals

Where:

FC = Fixed, or facility, costs. Expenses not dependent on the level of goods or services produced.
P = Price
VC = Variable costs. Expenses that change proportionally to the size of production.

Syntax

mmBEP(Price, Variable_Cost, Fix_Cost, Optional Do_Value)

Price The product price
Variable_Cost The product variable costs (the cost of production materials)
Fix_Cost The facility costs (like rent, wages, etc. assigned to the product)
Do_Value Optional - TRUE returns BEP in value, FALSE returns BEP in volume

Example

See example file Business Formulas.xls, sheet mmBEP.

Business analysis formulas for Excel. Marketing tool for professionals

Related functions
  • mmBEPR
  • mmDBAVG
  • mmDBCOUNT
  • mmDBSUM
  • mmPREMIUM
  • mmREBUY
  • mmREBUYS
  • mmBDI
  • mmCDI
  • mmMOI
  • mmPRESS
  • Price Indices
Related MM4XL software tools
  • BCG Matrix
  • Variation Analyst
Source
Paul Farris, Marketing metrics: 50+ metrics every executive should master
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