Total-cost recovery method.
Your break-even point
Enter the total cost and the price or the output to see your result here.
Even selling all of your output at this price, you still do not recover the cost. Revisit price, output or cost.
How to read itThis sum treats all cost as a single block, without separating what moves with output from what does not. It is the honest method for anyone who does not split fixed from variable, and it carries two consequences. The first is that the break-even holds for the output you expect: produce less and part of the cost does not fall with it, so the floor rises. The second is that the answer is exact about the cost you typed, not about what the season will actually cost. Run it again when the cost moves, and keep the date of each version.
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Enter the cost and at least the price or the output to generate the report.
Every activity has a floor: how much it must sell, or the price it must get, just to pay for itself. Add up the total cost and see, right away, how much to sell to recover it and the lowest price that pays for everything.
The math adds up everything that comes out of pocket for the activity into one total cost, then divides it two ways. Against the price you expect to get, it gives how much to sell: total cost divided by price per unit, rounded up, because selling the fraction would leave part of the cost uncovered. Against the output you expect to harvest, it gives the lowest price: total cost divided by expected output. And the margin of safety is how far output can fall short of what you expected before the activity turns to a loss: the difference between expected output and the quantity that recovers the cost, divided by expected output.
A total cost of $180,000 on the activity, an expected price of $47 per bushel and an expected output of 5,000 bushels: selling 3,830 bushels (180,000 ÷ 47, rounded up) recovers the cost; sell less, and it’s a loss. On the same numbers, the lowest price that pays for everything, selling the whole expected output, is $36 per bushel (180,000 ÷ 5,000). And the margin of safety is 23.4% ((5,000 − 3,830) ÷ 5,000): output can drop by nearly a quarter before the activity starts losing money. The method lumps fixed and variable cost into one block, the honest choice for anyone who doesn’t split the two apart (Gutierrez and Dalsted, Colorado State University Extension, 2012).