Break Even Calculator
Calculate break-even units, revenue, and contribution margin from fixed costs, selling price, and variable cost per unit.
Break-even point
Formula
Contribution Margin = Selling Price - Variable Cost
Break-even Units = Fixed Costs / Contribution Margin
Break-even Revenue = Break-even Units * Selling Price How the formula works
Contribution margin is the amount each sale contributes toward fixed costs after variable cost is paid. Once fixed costs are covered, additional contribution margin can become profit.
The calculator divides fixed costs by contribution margin to find how many units must be sold before the modeled costs are covered.
Complete example
A small business has $12,000 in monthly fixed costs. Each product sells for $50 and costs $20 to produce and fulfill.
- Fixed costs: $12,000
- Selling price per unit: $50
- Variable cost per unit: $20
- Contribution margin: $50 - $20 = $30
- Break-even units: $12,000 / $30 = 400 units
- Break-even revenue: 400 * $50 = $20,000
The business needs to sell 400 units in the period to cover the fixed and variable costs included in the model. Unit 401 would begin contributing profit under the same assumptions.
Read how to calculate break-even point for the full process.
When to use this calculator
- Estimate the sales volume needed before launching a product.
- Compare different prices, costs, or monthly expense levels.
- Check whether a new fixed cost is realistic for expected sales volume.
- Plan revenue targets for a product, service, event, or campaign.
How to interpret the results
Break-even units show the sales count required to cover the costs entered. Break-even revenue converts that count into a revenue target. Contribution margin shows how much each sale helps cover fixed costs.
If break-even units are much higher than realistic demand, you may need to raise price, reduce variable cost, reduce fixed cost, or rethink the product model.
Common mistakes
- Confusing fixed costs with variable costs.
- Ignoring platform fees, payment fees, or returns in variable cost.
- Assuming break-even means the business is already sustainably profitable.
- Using annual fixed costs with monthly sales assumptions, or mixing time periods.
- Forgetting that break-even does not include growth profit, owner pay, or taxes unless those costs are entered.
Related tools
- Markup Calculator: set a selling price from cost and markup.
- Profit Margin Calculator: check whether sales are profitable after cost.
- Product Pricing Calculator: include fees, shipping, discounts, and target margin.
- ROI Calculator: compare returns after an investment or campaign.
FAQ
What is break-even point?
Break-even point is the sales level where revenue covers fixed and variable costs. At that point, profit is zero before any costs not included in the model.
How do you calculate break-even units?
Divide fixed costs by contribution margin per unit.
What is contribution margin?
Contribution margin per unit is selling price per unit minus variable cost per unit.
What if variable cost is higher than selling price?
The business cannot break even on unit sales unless price increases or variable cost decreases.
What counts as fixed cost?
Fixed costs are costs that do not change much with each unit sold, such as rent, base payroll, software, insurance, equipment leases, or a monthly marketing budget.
What counts as variable cost?
Variable cost is the cost tied to each unit sold, such as materials, packaging, fulfillment, platform fees, payment fees, commissions, or direct labor.
Does break-even mean the business is profitable?
No. Break-even means the modeled revenue covers the modeled costs. Profit starts after the break-even point and only for costs included in the model.
Can I use break-even for services?
Yes. Use fixed monthly costs, a price per project or hour, and the variable cost required to deliver each project or billable hour.
Disclaimer
This calculator is for general business planning and educational use. It does not replace accounting, tax, or financial advice.