How to do break-even analysis in Excel?
Break-even analysis can help you get the point when the net profit is zero, which means the total revenues equals to the total expenses. It is quite useful to price a new product when you can forecast your cost and sales.
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Supposing you are going to sale a new product, and you know the variable cost of per unit and the total fixed cost. Now you are going to forecast the possible sales volumes, and price the product based on them.
1. Make an easy table, and fill items with given data in the table. See left screenshot:
2. Enter proper formulas to calculate revenue, variable cost, and profit. See left screenshot:
Revenue = Unit Price x Unit Sold
Variable Costs = Cost per Unit x Unit Sold
Profit = Revenue – Variable Cost – Fixed Costs
3. Click the Data > What-If Analysis > Goal Seek.
4. In the opening Goal Seek dialog box, please do as follows (see above screenshot):
(1) Specify the Set Cell as the Profit cell, in our case it is Cell B7;
(2) Specify the To value as 0;
(3) Specify the By changing cell as the Unit Price cell, in our case it is Cell B1.
(4) Click OK button.
5. And then the Goal Seek Status dialog box pops up. Please click the OK button to apply it.
Now it changes the Unit Price from 40 to 31.579, and the net profit changes to 0. Therefore, if you forecast the sales volume is 50, and the Unit price cannot be less than 31.579, otherwise loss occurs.
Download complex Break-even Template
Comparing to the Goal Seek feature, we can also apply the formula to do the break-even analysis easily in Excel.
1. Make an easy table, and fill items with given data in the table. In this method, we suppose the profit is 0, and we have forecasted the unit sold, the cost per unit, and fixed costs already. See below screenshot:
2. In the table, type the formula =B6/B2+B4 into Cell B1 for calculating the Unit Price, type the formula =B1*B2 into Cell B3 for calculating the revenue, and type the formula =B2*B4 into Cell B5 for variable costs. See below screenshot:
And then when you change andy one value of forecasted unit sold, cost per unit, or fixed costs, the value of unit price will change automatically. See above screenshot:
If you have recorded the sales data already, you can also make the break-even analysis with chart in Excel. This method will guide you to create a break-even chart easily.
1. Prepare a sales table as below screenshot shown. In our case, we assume the sold units, cost per unit, and fixed costs are fixed, and we need to make the break-even analysis by unit price.
2. Finish the table as below shown:
(1) In the Cell E2, type the formula =D2*$B$1, and drag its AutoFill Handle down to RangeE2:E13;
(2) In the Cell F2, type the formula =D2*$B$1+$B$3, and drag its AutoFill Handle down to Range F2:F13;
(3) In the Cell G2, type the formula =E2-F2, and drag its AutoFill Handle down to the Range G2:G13.
So far, we have finished the source data of break-even chart we will create later. See below screenshot:
3. In the table, please select the Revenue column, Costs column, and Profit column simultaneously, and then click Insert > Insert Line or Area Chart > Line. See screenshot:
4. Now a line chart is created. Please right click the chart, and select Select Data from the context menu. See below screenshot:
5. In the Select Data Source dialog box, please:
(1) In the Legend Entries (Series) section, select one of series as you need. In my example, I select the Revenue series;
(2) Click the Edit button in the Horizontal (Category) Axis Labels section;
(3) In the popping out Axis Labels dialog box, please specify the Unit Price column (except the column name) as axis label range;
(4) Click OK > OK to save the changes.
Now in the break-even chart, you will see the break-even point occurs when the price equals to 36 as below screenshot shown:
Similarly, you can also create a break-even chart to analyze the break-even point by sold units as below screenshot shown:
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To post as a guest, your comment is unpublished.· 8 months agoHow do I use this same formula when the variable cost differs based on quantity sold? Like the variable cost =$10 if I sell between 0-100, $9 if I sell 101-200, etc. Is this when I am supposed to used a data table? Totally confused, any help appreciated!
To post as a guest, your comment is unpublished.· 2 years agoHi,
is it possible that I don't have any fixed costs?
I'm buying and selling stuff from home.
If I have a cost per unit amount, would this also be considered a 'fixed cost'?
To post as a guest, your comment is unpublished.· 2 years agoWhen attempting to download the example using a MAC you get a .cat file that is.... useless...
To post as a guest, your comment is unpublished.· 3 years agoSimply, understandable and efficient way of doing it! Thanks for simplyfying economy :P