How to Calculate Break Even Point

Break-even analysis shows how many units or how much revenue is needed before profit starts.

Formula

Contribution Margin = Selling Price - Variable Cost
Break-even Units = Fixed Costs / Contribution Margin
Break-even Revenue = Break-even Units * Selling Price

Example

If fixed costs are $12,000, selling price is $50, and variable cost is $20, contribution margin is $30. Break-even units are 400.

Fixed vs variable costs

Fixed costs usually stay in place regardless of unit volume. Variable costs change with each unit sold. Getting this split wrong can make the break-even point misleading.

Use the calculator

Use the Break Even Calculator to calculate units, revenue, and contribution margin.

FAQ

What is the break-even point formula?

Break-even units equal fixed costs divided by contribution margin per unit.

What is contribution margin per unit?

Contribution margin per unit is selling price per unit minus variable cost per unit.

Can a business fail to break even?

Yes. If selling price is less than or equal to variable cost, each unit does not contribute toward fixed costs.