The break-even formula
Your break-even point is the number of units you must sell so total revenue exactly covers total costs — no profit, no loss. The formula is break-even units = fixed costs ÷ (price per unit − variable cost per unit). The denominator, price minus variable cost, is the contribution margin: the amount each unit contributes toward covering fixed costs. If price does not exceed variable cost, every sale loses money and break-even is impossible. The denominator here is your contribution margin, which the contribution margin calculator works out per unit.
How to use this calculator
Enter your fixed costs (rent, salaries, and other expenses that do not change with volume), the price per unit you charge, and the variable cost per unit (materials, shipping, and per-sale costs). The tool returns the break-even units and the revenue at that point. Pair it with the ROI calculator to evaluate whether the venture is worth the capital. Make sure the price you enter reflects your real gross profit margin after cost of goods.
Worked example
With $10,000 of fixed costs, a $50 price, and $30 variable cost, the contribution margin is $20 per unit. Break-even = 10,000 ÷ 20 = 500 units, or $25,000 in revenue. Raising your price or cutting variable cost lowers the break-even point:
| Price | Variable cost | Break-even units |
|---|---|---|
| $50 | $30 | 500 |
| $60 | $30 | 334 |
| $50 | $20 | 334 |
These figures are an estimate for general information only and are not financial advice; consult a qualified professional before making money decisions. If you are still setting the price, the markup calculator is the place to start.
Frequently asked questions
- How do I calculate the break-even point?
- Divide your fixed costs by the contribution margin per unit (price minus variable cost). The result is the number of units you must sell to cover all costs.
- What is the break-even at $10,000 fixed costs and a $20 margin?
- It is 500 units: $10,000 ÷ ($50 − $30). At that volume, total revenue of $25,000 exactly covers fixed and variable costs.
- What is contribution margin?
- Contribution margin is the price per unit minus the variable cost per unit. It is the amount each sale contributes toward covering fixed costs and then profit.
- Why can't I break even if price is below variable cost?
- If each unit costs more to make than it sells for, every sale increases your loss, so no sales volume will ever cover fixed costs.
- What if my fixed costs change part-way through the year?
- Recalculate with the new total, because break-even moves in direct proportion to fixed costs. Adding $2,000 of rent to a $10,000 base at a $20 contribution margin lifts break-even from 500 units to 600.