Break-even calculator

Units and revenue to cover fixed cost. Contribution margin and the crossing of sales vs total cost.

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Break-even units
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round up to a whole unit
Revenue Total cost Break-even
Break-even revenue
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Contribution / unit
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Contribution margin
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Profit at target units
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Units = fixed cost / (price − variable cost).

Costs and price

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BREAK-EVEN ANALYSIS GUIDE

Break-Even Point: How to Calculate It, Read the Chart, and Use It

Break-even analysis tells you how many units you need to sell before total revenue covers total costs. The key is the amount each unit contributes after its variable cost is paid.

Break-even quantity Revenue Total cost Fixed cost Dollars Units sold
Below the crossing point, total cost is higher than revenue. At the crossing point, profit is zero. Beyond it, each additional unit adds positive contribution.

What Is the Break-Even Point?

The break-even point is the sales level at which total revenue equals total cost. At that point, the business has neither a profit nor a loss.

The calculation separates costs into two groups. Fixed costs stay broadly unchanged as unit volume changes, such as rent or a fixed subscription. Variable costs move with the number of units sold, such as materials, packaging, or per-sale commissions.

Total cost = Fixed cost + (Variable cost per unit × Units)
Total revenue = Selling price per unit × Units

The Break-Even Formula

The most useful version of the formula works in units. First find the contribution made by one unit. That is the selling price minus the variable cost of that unit.

Contribution per unit = Price − Variable cost
Break-even units = Fixed cost ÷ (Price − Variable cost)

The same core relationship appears in both reference calculators: fixed costs are divided by the contribution available from each unit. In other words, the more each sale contributes after variable cost, the fewer units you need to cover fixed costs.

Worked example

A simple product

Suppose fixed costs are $12,000, the selling price is $40 per unit, and variable cost is $16 per unit.

Contribution = $40 − $16 = $24
Break-even units = $12,000 ÷ $24 = 500 units

At 500 units, revenue is $20,000 and total cost is also $20,000. Selling the 501st unit creates positive operating profit, assuming the cost assumptions remain valid.

How to Read a Break-Even Chart

The chart has two important lines. Revenue starts at zero and rises with the selling price. Total cost starts at the fixed-cost level and rises with the variable cost per unit.

Loss zone Revenue < total cost Profit zone Revenue > total cost Break-even: profit = 0
The intersection is the decision point: before it, the business has not covered all costs; after it, the contribution remaining after fixed costs becomes profit.

Contribution Margin and Why It Matters

Contribution margin is the amount of revenue left after variable costs. It is the bridge between sales volume and fixed-cost coverage.

Contribution margin ratio = (Price − Variable cost) ÷ Price

For example, a $40 selling price and $16 variable cost produce a $24 contribution per unit. The contribution margin ratio is 60%. That means 60 cents of every sales dollar is available to cover fixed costs and, after break-even, profit.

Contribution margin is also useful when comparing products, pricing decisions, sales targets, and the effect of changing variable costs.

Break-Even Revenue

You can express the same break-even point in dollars instead of units. Multiply the break-even units by the selling price, or divide fixed costs by the contribution margin ratio.

Break-even revenue = Break-even units × Price
Break-even revenue = Fixed cost ÷ Contribution margin ratio

Break-Even vs. Target Profit

Break-even is only the zero-profit case. If you want a specific operating profit, add that target to fixed costs before dividing by contribution per unit.

Units for target profit = (Fixed cost + Target profit) ÷ (Price − Variable cost)

This turns the break-even calculation into a practical sales target. For example, if fixed costs are $12,000, contribution is $24, and the desired profit is $6,000, the required volume is 750 units.

What Changes the Break-Even Point?

Higher fixed costRaises the break-even quantity because more contribution is needed before fixed costs are covered.
Higher variable costReduces contribution per unit and therefore raises the break-even quantity.
Higher selling priceIncreases contribution per unit and generally lowers the break-even quantity, provided demand holds.
Fixed cost Lower contribution Higher contribution Even higher Contribution per unit →
With fixed costs held constant, stronger contribution per unit means fewer units are needed to reach break-even.

Important Assumptions and Limitations

Break-even analysis is a model, not a forecast. It works best when the selling price, variable cost per unit, and fixed costs are reasonably stable over the range being analyzed.

  • Do not treat a cost as fixed simply because it is paid monthly; some monthly costs vary with usage.
  • Do not use a contribution margin of zero or less. If price is equal to or below variable cost, there is no finite positive break-even quantity.
  • For multiple products, a single-product formula needs a stable sales mix or a weighted contribution margin.
  • Step costs, bulk discounts, capacity limits, taxes, financing costs, and changing prices can make the simple linear model less accurate.

Common Break-Even Mistakes

Confusing margin with markupContribution margin is based on selling price and variable cost; markup uses cost as its base.
Forgetting fixed costsVariable profit per unit alone is not the break-even calculation.
Rounding too earlyKeep the exact contribution and break-even quantity until the final result, then round units upward when planning physical sales.
Mixing time periodsMonthly fixed costs should be paired with a monthly unit or revenue assumption.

The Main Idea

Break-even comes down to one question: how many units are required for total contribution to cover fixed costs? Once you know contribution per unit, the calculation is straightforward. The chart then makes the same relationship visible: the revenue line and total-cost line meet at zero profit.