The "expected" outcome of this scenario is that you will have gross sales of $125000. This will earn you $75000 of gross margin, against a fixed cost of $50000 and produce a profit of $25000.
At that pricing level, you need to sell 333 Units to Break Even. If you are confident you can sell 500 Units, you could price them as low as $200 and still break even.
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This break even point calculator can help you determine how close a business is to turning a profit. It compares the sell price for the product with the unit cost to get a contribution margin per unit sold. It then compares this to your fixed costs. This tool serves as a contribution margin calculator.
To help with breakeven analysis, two break even points are presented. The first break even point, expressed in units sold, identifies how many units you will need to sell to cover your fixed costs. We present the second break even point, the break even price, in the event you are comfortable with your ability to sell the expected number of units (if, for example, your audience was required to buy it) and wanted to know the minimum price which that would result in a profit.
The break even point should be regarded as the starting point of your pricing analysis, not the end. You should take Price Elasticity into consideration when developing a pricing strategy. Your customers sensitivity to price will likely vary by customer segment, product, service requirements, and situational factors. A good pricing strategy takes advantage of these factors to maximize margins.
We intend to develop several additional break even point calculators for specific niche applications (such as direct or online marketing). If there is a specific application you're interested in, please drop us a line and we can look into developing a customized break even analysis tool.
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