A **break-even analysis** is a calculation that tells you the number of units a business must sell of some product in order to break even, i.e. make a profit of exactly zero dollars.

After this point, additional units sold will result in a positive profit.

To perform break-even analysis, you can use the following simple formula:

**Break-Even Point = Fixed Cost / (Selling Price Per Unit – Cost Per Unit)**

The following example shows how to use this formula to perform break-even analysis in Excel.

**Example: How to Perform Break-Even Analysis in Excel**

Suppose Ty plans on opening a cookie shop.

His **fixed costs** will include the equipment he needs to buy along with the ingredients for the cookies, which comes to a total of **$1,000**.

Each cookie will cost **$1** to make and he plans to sell them for **$5** each.

Suppose we would like to perform break-even analysis to determine how many cookies he must sell to break even.

To do so, we can enter his fixed costs, selling price per unit, and cost per unit in Excel.

We can then type the following formula into cell **B5** to calculate the number of units he must sell to break even:

=B1/(B2-B3)

The following screenshot shows how to use this formula in practice:

In order to break even, i.e. achieve a profit of exactly zero dollars, he must sell **250** units.

If we’d like, we can also type the following formulas into the following cells to calculate the total revenue, total cost, and total profit Ty will earn by selling this many units:

- B6:
**=B5*B2** - B7:
**=B1+(B5*B3)** - B8:
**=B6-B7**

The following screenshot shows how to use these formulas in practice:

We can see that his total revenue will be **$1,250**, total cost will be **$1,250** and total profit will be **$0**.

Once we have all these formulas in place, we could also change the selling price per unit in cell **B2** to see how various prices affect the number of units he must sell to break even.

For example, suppose we change the selling price per unit to **$6**:

We can see that the number of units he must sell in order to break even drops to **200**.

This should make sense. The higher the selling price per unit, the greater the profit per cookie and the fewer number of cookies he must sell in order to break even.

Feel free to play around with the values in cells **B1**, **B2** and **B3** to see how changing different price changes the value for the break even point.

**Additional Resources**

The following tutorials explain how to perform other common operations in Excel:

How to Calculate Sales Growth in Excel

How to Create a Sales Forecast in Excel

How to Convert Quarterly Data to Annual Data in Excel