Break Even Calculator

Break-even is a question about contribution, not about price. What matters is how much of each sale is left over after the cost of making that sale, and how many times you need that leftover to cover the costs you pay whether you sell anything or not.

A worked case

Fixed costs of 48,000 for the year, a variable cost of 11.00 per unit, a selling price of 29.00.

• Contribution margin per unit: 18.00
• Contribution margin ratio: 62.07%
• Break-even volume: 2,667 units
• Break-even revenue: 77,343.00

Contribution per unit = price − variable cost
Break-even units      = fixed costs ÷ contribution per unit

The exact division gives 2,666.67. The result rounds up, because 2,666 units leaves 12.00 of fixed cost uncovered and you cannot sell two thirds of a unit. Unit 2,668 is the first that produces profit.

The lever that moves fastest

Raise the price by one unit of currency and contribution goes from 18.00 to 19.00 — break-even falls to 2,527 units, a 5% reduction in the volume you need, from a 3.4% price rise. Cut the variable cost by the same amount and the effect is identical, because contribution is all that the formula sees.

Trimming fixed costs is more linear: knock 10% off the 48,000 and the break-even volume falls by exactly 10%. Which lever is available to you is a business question, but the arithmetic says price and unit cost are where the leverage sits.

If the selling price does not exceed the variable cost, there is no break-even at all. The tool refuses that input rather than returning a number, because every additional unit widens the loss.

Getting the two cost buckets right

Misclassification is where break-even models fail in practice.

Fixed costs are those that do not move with volume over the period: rent, permanent salaries, insurance, software subscriptions, loan interest, depreciation. Use the total for the same period as your sales figure — annual fixed costs with an annual volume, monthly with monthly. Mixing the two is the most frequent mistake on this page.

Variable costs move with each unit: materials, direct labour where it genuinely scales, packaging, per-unit shipping, payment processing fees, sales commission.

Semi-variable costs — a utility bill with a standing charge, a salesperson on base plus commission — need splitting between the two. Putting the whole of a semi-variable cost in the wrong bucket shifts the answer materially.

Where the model is thin

• Constant price at every volume. Selling 2,667 units almost certainly involves discounts, distributor terms and bulk pricing that the single price input cannot represent.
• Constant unit cost. Supplier pricing usually improves with quantity, which makes the real break-even slightly lower than modelled.
• Everything produced is sold. No unsold stock, no returns, no write-offs.
• One product. A multi-product business breaks even on a weighted average contribution margin, and the mix changes the answer.
• Gross, not net. Corporation tax and any fixed cost you forgot push the true threshold higher.

Treat the number as a floor to beat, not a target to hit.

Elsewhere on the site

To calculate the contribution margin as a percentage before you start, use the profit margin calculator. To set a price from cost in the first place, use the markup calculator. To test whether the fixed investment behind those costs paid off, use the ROI calculator.