To calculate the break-even point, you need to determine the level of sales or production at which total revenue equals total costs, resulting in neither profit nor loss. The break-even point can be calculated using the following formula:

*Break-even point (in units) = Fixed Costs / (Selling Price per Unit−Variable Cost per Unit)*

Or, if you want to calculate the break-even point in terms of revenue:

**Break-even point (in revenue) = Fixed Costs / Contribution Margin Ratio**

Where:

- Fixed Costs: The total amount of fixed costs incurred by the business over a certain period (e.g., a month).
- Selling Price per Unit: The price at which each unit of the product is sold.
- Variable Cost per Unit: The cost incurred to produce each unit of the product, which varies with the level of production or sales.
- Contribution Margin Ratio: The contribution margin per unit divided by the selling price per unit. It represents the portion of each sale that contributes to covering fixed costs and generating profit.

Here’s a step-by-step process to calculate the break-even point:

Determine Fixed Costs: Add up all fixed costs incurred by the business, such as rent, salaries, utilities, insurance, and depreciation.

Determine Selling Price per Unit: Decide on the selling price of each unit of the product or service.

Determine Variable Cost per Unit: Identify the variable costs associated with producing each unit, including direct materials, direct labor, and variable overhead.

Calculate Contribution Margin per Unit: Subtract the variable cost per unit from the selling price per unit to obtain the contribution margin per unit.

Calculate the Break-even Point:

- If calculating in units, divide the total fixed costs by the contribution margin per unit.
- If calculating in revenue, divide the total fixed costs by the contribution margin ratio.

The resulting figure represents the level of sales or production (in units or revenue) required for the business to cover all its costs and reach the break-even point. Any sales or production beyond this point will generate profit for the business.