How to use this break-even calculator
- Fixed costs, enter the total costs that stay the same no matter how much you sell, such as rent, salaries and insurance.
- Selling price per unit, enter the price a customer pays for one unit of your product or service.
- Variable cost per unit, enter what it costs you to make or supply one unit, such as materials and packaging.
- Target profit (optional), enter a profit goal beyond simply breaking even to see how many units that takes.
- Read your break-even point, break-even revenue, contribution margin and units for target profit, they update instantly as you type. The chart below plots total revenue and total cost side by side so you can see exactly where they cross.
How break-even is calculated
Break-even is the point where your total revenue exactly covers your total costs, so you make neither a profit nor a loss. The calculation has three short steps. First, work out the contribution margin per unit, which is your selling price minus the variable cost of one unit: contribution margin = price - variable cost per unit. This is the slice of every sale left over to pay down your fixed costs.
Next, divide your total fixed costs by that contribution margin to get the break-even point in units: break-even units = fixed costs ÷ contribution margin. Because you cannot sell part of a unit, the result is rounded up to the next whole unit. Finally, multiply those units by your selling price to get the break-even revenue: break-even revenue = break-even units × price.
A worked example
Say your fixed costs are 5,000, you sell each unit for 25 and each unit costs you 10 to make. Your contribution margin is 25 - 10 = 15 per unit. Dividing fixed costs by that margin gives 5,000 ÷ 15 = 333.3, which rounds up to 334 units. At 25 each, that is a break-even revenue of 334 × 25 = 8,350. Sell more than 334 units and every extra sale adds 15 of profit; sell fewer and you are still covering costs.
If your variable cost per unit ever matches or beats your selling price, the contribution margin is zero or negative and there is no break-even point, because each sale loses money. The calculator shows a dash and a short note when that happens, so raise your price or cut your variable cost to get a positive margin.
Finding units for a target profit
Breaking even is the floor, not the goal, so this calculator also works out how many units you need to sell to hit a specific profit target above that floor: units for target profit = (fixed costs + target profit) ÷ contribution margin. Using the same numbers as above, fixed costs of 5,000, a price of 25 and a variable cost of 10 per unit, if you want a profit of 2,000 the sum is (5,000 + 2,000) ÷ 15 = 466.7, which rounds up to 467 units. The same "no positive margin" rule applies here too: if your variable cost is at or above your price, no number of units can ever reach a positive profit target, and the calculator explains that instead of showing a meaningless number.
Frequently asked questions
How do you calculate the break-even point?
Work out your contribution margin per unit (price minus variable cost), then divide total fixed costs by that margin. The result is the number of units you must sell to cover all costs.
What is contribution margin?
It is the selling price of one unit minus the variable cost of that unit. It is the amount each sale contributes towards your fixed costs and, once you pass break-even, towards profit.
How do you find break-even in revenue?
Multiply the break-even point in units by the selling price per unit. If you need 334 units at 25 each, your break-even revenue is about 8,350.
Why does it sometimes show no break-even point?
If the variable cost per unit is the same as or higher than the selling price, the contribution margin is zero or negative, so no number of units will ever cover your fixed costs.