![]() ![]() What Is Break Even Cost?īreak-even cost is the total of your fixed and variable costs. Once you’ve pulled up your total sales from your bar inventory platform or POS, the break-even calculations can begin. BinWise Pro, for example, makes it easy to immediately pull up sales numbers with its SmartView Report. Total SalesĬheck your bar inventory software for historical revenue. ![]() Any credit card processing, merchant, or convenience feesĪgain, these variable costs should be in your P&L.Restaurant cleaning supplies and services.Food cost (see our food cost calculator).Variable costs for bars and restaurants include: Or, conversely, decrease because of less business. Variable costs are the fluctuating expenses that increase because of more business. Restaurant hood cleaning, keg line cleaning, powering walk-in refrigerators and wine cellars, etc. Restaurant marketing and advertising expenses.This includes occupancy costs like rent and property tax, along with fixed salaries, office supplies, licenses and permits, and insurance. These can usually be found in your restaurant chart of accounts. Think of it this way: fixed costs are what your business has to pay even if all your customers disappear. What Are Restaurant Fixed Costs?įixed costs are fixed because they’re paid no matter what-regardless of traffic or output. If you’re on top of your restaurant accounting game, you can find these in your restaurant profit and loss statement. The three values needed for your BEP calculation are: To calculate the break-even point, you need to figure out when revenue exceeds costs. $5000 / 0.3333 = $15,001.Break Even Cost: How to Calculate BEP for Restaurants This means the Artist needs to sell just over $15,000 of CDs to breakeven. To calculate the contribution margin we take the selling price per unit and deduct the variable cost per unit, in our example this is $4, then this number is divided by the selling price which gives us a contribution margin of 0.3333 (to 4 decimal places). To calculate our breakeven point in terms of money we’d take the fixed costs and divide it by the contribution margin. $5000 / 4 = 1,250 units Fixed costs / (selling price - variable cost) = units to sell to breakeven Calculating breakeven point in money This means the Artist would need to sell 1,250 CDs to breakeven. Next we take our fixed costs and divide it by 4, which gives us 1,250. To calculate our breakeven point in units we’d take the selling price of $12 and deduct the variable cost per unit of $8, this leaves us with $4. Next we need to know the selling price of the product, in our example it’s $12 per CD. In our example our variable cost per unit is $8. All these costs apply to each product sold. For example, for a CD you would have manufacturing costs, VAT (if you live in the UK), packaging and delivery etc. Next we need to calculate our variable cost per unit, which are expenses that apply to the individual product when sold. In our example our fixed costs are $5,000. In our example of an Artist selling CDs, a fixed cost would be the music production of the album, cost to hire out a studio, graphic design for the album etc. Your fixed costs are amounts relating to your product that doesn’t change, regardless of the amount of units sold. To calculate how many products you need to sell in order to breakeven, firstly you need to work out your fixed costs. We’ll use an Artist selling CDs as an example. We can work out our breakeven point by either calculating how many units we need to sell, or the amount of money we need to make. However, if the target of 500 units is not met then the business has made a loss. If a business knows that they need to sell 500 units to breakeven, then any sold above this point is classed as profit. By calculating your breaking even point you will know how many units you need to sell in order to balance the books. When a business breaks even, it means that their expenses equal their revenue. ![]()
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