ANZ

The breakeven analysis calculator allows you to examine some of the critical profit drivers of your business including- sales volume, average cost of production and the average sales price.

The calculation indicates the average number of units your business has to sell to cover set up costs (in a start up business), to cover fixed costs in an established business, or to achieve a desired profit level.

For information on using this calculator see below.

Input desired Net profit (whole dollars) or leave at zero for breakeven	$
Input startup or fixed costs (whole dollars)	$
Input average variable cost of production of units	$
Input average unit sales price	$
A red star indicates a mandatory field.

Fill in the required values based on the following information:

• Leave profit at zero for breakeven or input a desired profit amount in whole dollars.
• The start up or fixed costs of your business are the costs that are payable even if your business did not sell anything (for example rent, rates and finance costs). Input in whole dollars.
• The average variable cost is the cost of producing each "unit" sold by your business (such as variable labour, production or raw material costs). This could be $2 per kilogram of wool or $5 per haircut.
• Alternatively leave the default zero in the average variable cost box and put all the business' costs in the Input startup or fixed costs area. This will result in all costs being treated as fixed with a Gross Profit Margin of 100%. This is the case for many industries with zero or few variable costs.
• The average unit sales price is the average price per "unit" sold by your business. This could be $3.70 per kilogram of wool or $20 per haircut. It must be greater than the average variable cost of production.

If you leave the profit input area at zero, the calculator will give an indication of how many units your business will need to sell to breakeven.

Breakeven calculation can be particularly useful if you are considering expanding your business by putting on extra staff or increasing production. Adding the cost of this into the start up or fixed costs input area will indicate the volume of sales that could be required to meet the cost of expansion. If you are looking at expanding, it is also worth considering how much extra working capital you will require particularly if your business offers sales on terms.

You can use the calculator to explore the effects of various changes to your business such as reducing fixed costs or increasing the average sale price per unit sold. Breakeven calculation can also be used over different time periods. To use the haircut example, you could work out the weekly fixed costs and the number of haircuts per week required to break even. This is useful in planning short-term sales targets for your business and staff.

By experimenting with different input values, you can use the calculator to indicate the effect of a rise or fall in the cost of production or the sales price. These factors along with sales volume combine to form some of the key drivers of business profitability.

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