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Locational break-even analysis compares alternative sites at the same operating volume. Calculate site cost lines, pairwise crossover volumes and the least-cost operating ranges, with spreadsheet formulas and a three-site example.
Locational break even analysis compares alternative site cost lines and calculates the operating volumes where those costs are equal. It helps a finance team see when higher fixed costs are offset by lower variable costs. A cost crossover does not show that either location is profitable; that requires a separate revenue calculation.
Define a common unit before collecting estimates: completed shipments, finished units or another activity the sites can deliver to the same standard. Use the same period, currency, service requirement and volume at every location. Comparing one site's annual budget with another site's monthly budget produces a meaningless crossover.
The SBA's location guidance identifies rent, salaries, utilities, insurance and government fees among expenses that can vary by place. Gather quotations and local estimates for the specific sites instead of applying one company's average cost to all of them.
The ordinary break-even analysis asks when revenue equals costs. The SBA's break-even definition uses that revenue-versus-cost boundary. The locational comparison below instead holds revenue and output quality equal, then asks which site costs less.
Site total cost = Fixed cost + Variable cost per unit × Operating volume
Crossover volume between sites A and B = (Fixed cost B − Fixed cost A) / (Variable cost A − Variable cost B)
The formula follows by setting the two total-cost equations equal. It assumes both cost lines remain valid at the crossover volume, including any staffing, equipment and space limits.
Use one budget line per site and cost category, retaining site ID, period, category, fixed amount, variable rate, unit definition, quotation date and source reference. Keep committed rent separate from activity-related handling labor. Split mixed expenses into their fixed and variable portions.
A fictional US distributor is comparing annual operating costs for three fulfillment locations. All three can meet the same shipment specification and the volumes shown. Revenue, delivery service and product mix are assumed equivalent; these are illustrative estimates rather than regional cost benchmarks.
| Annual fixed cost category | Site A (USD) | Site B (USD) | Site C (USD) |
|---|---|---|---|
| Occupancy and committed utilities | 60,000 | 110,000 | 180,000 |
| Base staffing and supervision | 30,000 | 50,000 | 80,000 |
| Equipment, insurance and other fixed costs | 30,000 | 40,000 | 60,000 |
| Annual fixed cost | 120,000 | 200,000 | 320,000 |
| Variable cost per shipment | Site A (USD) | Site B (USD) | Site C (USD) |
|---|---|---|---|
| Handling labor | 4 | 2 | 1 |
| Packaging and operating supplies | 3 | 2 | 1 |
| Incremental utilities and other costs | 2 | 1 | 1 |
| Variable cost per shipment | 9 | 5 | 3 |
Reconcile each fixed-cost total to the approved budget and each variable rate to its supporting assumptions. If freight differs by location, include it consistently in the relevant cost categories before declaring service economics equal.
Keep one-time relocation, deposits and fit-out cash in a separate investment schedule. Include the resulting recurring expense here when relevant, but avoid putting an entire equipment purchase and its annual depreciation into the same operating-cost comparison.
Place this summary in columns A through C, with the header in row 1:
| Site | Annual fixed cost (USD) | Variable cost per shipment (USD) |
|---|---|---|
| A | 120,000 | 9 |
| B | 200,000 | 5 |
| C | 320,000 | 3 |
Put a candidate annual volume in E2. Calculate each site's total cost in D2 and fill down through D4:
=$B2+$C2*$E$2
Use these pairwise crossover formulas in separate cells:
A versus B: =(B3-B2)/(C2-C3)
A versus C: =(B4-B2)/(C2-C4)
B versus C: =(B4-B3)/(C3-C4)
| Pair | Calculation | Crossover shipments |
|---|---|---|
| A and B | (200,000 − 120,000) / (9 − 5) | 20,000 |
| A and C | (320,000 − 120,000) / (9 − 3) | 33,333.33 |
| B and C | (320,000 − 200,000) / (5 − 3) | 60,000 |
Keep full precision in cells and display fractional crossovers to two decimal places. Check immediately adjacent feasible shipment counts when a crossover is not a whole number. Equal variable rates need a separate comparison of fixed costs because the crossover denominator would be zero.
The A-versus-C crossover is not a switch between the cheapest sites. At the exact crossover, displayed as 33,333.33 shipments, their cost lines meet at $420,000, but Site B costs $366,666.67. B is cheaper than both. A pairwise calculation alone would miss this.
Test a range of volumes using the same cost formula:
| Annual shipments | Site A total cost (USD) | Site B total cost (USD) | Site C total cost (USD) | Cheapest site |
|---|---|---|---|---|
| 10,000 | 210,000 | 250,000 | 350,000 | A |
| 20,000 | 300,000 | 300,000 | 380,000 | A and B |
| 30,000 | 390,000 | 350,000 | 410,000 | B |
| 50,000 | 570,000 | 450,000 | 470,000 | B |
| 60,000 | 660,000 | 500,000 | 500,000 | B and C |
| 80,000 | 840,000 | 600,000 | 560,000 | C |
Within the assumed operating range, A is cheapest below 20,000 shipments, B between 20,000 and 60,000, and C above 60,000. The boundary volumes have ties. Test low, expected and high demand against those ranges before approving a location with greater fixed commitments.
The independent check at the A/B boundary is 120,000 + 9 × 20,000 = 200,000 + 5 × 20,000 = $300,000. At the B/C boundary, 200,000 + 5 × 60,000 = 320,000 + 3 × 60,000 = $500,000. Both sides must match without relying on rounded display values.
Finance owns the comparison, operations confirms throughput and service feasibility, and procurement validates quoted costs. Record which assumptions remain estimates. A low-cost site with insufficient capacity cannot serve the scenario just because its spreadsheet line extends through it.
If locations change selling prices, customer access or delivery performance, compare profit using the corresponding revenue assumptions as well. A site cost crossover is only one input to that decision. Hospitality businesses should pair the location comparison with restaurant break-even analysis or hotel break-even analysis to test whether demand covers the chosen property's operating costs.
Bring a sample of your own site budgets and volume assumptions to Covirage. Covirage maps the columns, its tools compute and check total costs and crossover figures, and the external AI model explains the comparison with every figure traced to its rows. Create a free Covirage account; account creation takes about a minute, then you set up your business and bring your data.
See cost variance analysis for the supporting overview of comparing costs and their drivers.
Ordinary break-even compares revenue with costs to find the sales volume that covers expenses. Locational break-even compares one site's costs with another's costs. Revenue can be omitted only when it is equivalent across sites at the volume being compared.
Their cost lines are parallel. If fixed costs differ, the lower-fixed-cost site remains cheaper at every comparable volume. If fixed costs are equal too, the cost lines coincide, so there is no unique crossover volume to calculate.
Retain the exact crossover for the comparison, then evaluate the feasible whole-unit volumes immediately around it. Rounding upward automatically can misstate which site is cheaper. Also confirm that both sites can operate at those volumes without another cost step.