Break-even point calculator
Find the units and revenue you need to cover your costs, with contribution margin, margin of safety and a cost-versus-revenue crossover chart.
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Contribution margin
$18.00
60% of the price
Break-even revenue
$66,666.67
Units for $20,000 profit
3,334 units
$100,000.00
Profit at expected volume
$23,000.00
3,500 units → $105,000.00
Margin of safety
1,278 units
sales can fall 36.5% before a loss
Fixed cost per expected unit
$11.43
- Total revenue
- Total cost
- Fixed cost
Formula and working
Contribution margin per unit
CM = price − variable cost CM = 30 − 12 = $18.00
Break-even units
Units = fixed costs / CM Units = 40,000 ÷ 18 = 2,222.22 units
Break-even revenue
Revenue = fixed costs / contribution margin ratio ratio = 18 ÷ 30 = 0.6 Revenue = 40,000 ÷ 0.6 = $66,666.67
Units for a target profit
Units = (fixed costs + target profit) / CM Units = (40,000 + 20,000) ÷ 18 = 3,333.33 units
Margin of safety
MoS = (expected units − break-even units) / expected units MoS = (3,500 − 2,222.22) ÷ 3,500 = 36.51%
Break-even units are usually rounded up: you cannot sell a fraction of a unit, and the fractional part still leaves a small loss.
| Units sold | Revenue | Total cost | Profit |
|---|---|---|---|
| 0 | $0.00 | $40,000.00 | −$40,000.00 |
| 445 | $13,350.00 | $45,340.00 | −$31,990.00 |
| 889 | $26,670.00 | $50,668.00 | −$23,998.00 |
| 1,334 | $40,020.00 | $56,008.00 | −$15,988.00 |
| 1,778 | $53,340.00 | $61,336.00 | −$7,996.00 |
| 2,223 | $66,690.00 | $66,676.00 | +$14.00 |
| 2,667 | $80,010.00 | $72,004.00 | +$8,006.00 |
| 3,112 | $93,360.00 | $77,344.00 | +$16,016.00 |
| 3,556 | $106,680.00 | $82,672.00 | +$24,008.00 |
| 4,001 | $120,030.00 | $88,012.00 | +$32,018.00 |
| 4,445 | $133,350.00 | $93,340.00 | +$40,010.00 |
Assumptions
- One product at one price. If you sell a mix, run the numbers on a weighted average price and variable cost, or on each product line separately.
- Fixed costs are genuinely fixed across the whole volume range shown — in practice they step up when you add a shift, a machine or a warehouse.
- The variable cost per unit is constant. Bulk discounts on materials lower it as volume rises, which pulls the real break-even point down.
- Everything produced is sold, with no inventory build-up and no discounting.
- Revenue is recognised at the point of sale, ignoring payment terms and bad debt.
How to use the break-even calculator
- Add up your fixed costs for the period you care about — a month, a quarter, a year — and enter the total. Rent, salaried staff, software subscriptions, insurance, accounting.
- Enter the variable cost per unit: everything that only happens because you made or sold one more. Materials, packaging, shipping, payment processing, per-unit labour, affiliate commission.
- Enter the selling price per unit, excluding sales tax or VAT, since that is collected on behalf of the tax authority rather than earned.
- Optionally add a target profit and the units you expect to sell to get the volume you need and your margin of safety.
The formulas
Every unit you sell contributes its price minus its variable cost towards covering the fixed costs. That amount is the contribution margin, and break-even is simply the point where the contributions add up to the fixed costs:
Contribution margin = price − variable cost per unitContribution margin ratio = contribution margin / priceBreak-even units = fixed costs / contribution marginBreak-even revenue = fixed costs / contribution margin ratioUnits for a target profit = (fixed costs + target profit) / contribution marginMargin of safety = (expected units − break-even units) / expected units
How the margin changes the answer
With fixed costs of 50,000 for the period:
| Price | Variable cost | Contribution | CM ratio | Break-even units | Break-even revenue |
|---|---|---|---|---|---|
| 10 | 4 | 6 | 60% | 8,334 | 83,333 |
| 30 | 12 | 18 | 60% | 2,778 | 83,333 |
| 30 | 20 | 10 | 33.3% | 5,000 | 150,000 |
| 50 | 20 | 30 | 60% | 1,667 | 83,333 |
| 100 | 40 | 60 | 60% | 834 | 83,333 |
| 100 | 70 | 30 | 30% | 1,667 | 166,667 |
Every row with a 60% contribution margin ratio breaks even at the same revenue — 83,333 — regardless of the price point. Break-even revenue depends only on the ratio; break-even units depend on the price. That is why margin, not price, is the number to defend when a customer asks for a discount.
Sorting fixed from variable
| Fixed | Variable | Semi-fixed (steps up) |
|---|---|---|
| Rent and rates | Raw materials | Extra production shift |
| Salaried staff | Packaging and shipping | Additional machine or vehicle |
| Insurance | Payment processing fees | Second warehouse |
| Software subscriptions | Sales commission | Support headcount per 1,000 customers |
| Accounting and legal | Per-unit labour | Tiered hosting plan |
Semi-fixed costs are the reason a single break-even number can mislead. They are flat inside a range of volumes and jump at the boundary, so the honest way to use this calculator is to run it once for each capacity band you might operate in.
Margin of safety: the number worth watching
Break-even tells you where the floor is. Margin of safety tells you how far above it you are standing. If you expect 3,500 units and break even at 2,223, your margin of safety is about 36% — sales can fall by more than a third before you lose money. A business running at 5% is one bad quarter from trouble even though it is technically profitable.
Limits of a single-product model
- Product mix. With several products, use a weighted average price and variable cost based on your expected mix, or model each line separately and split the fixed costs. If the mix shifts towards low-margin items, the real break-even point moves even though nothing else changed.
- Volume discounts. Materials usually get cheaper per unit at scale, so the real cost line bends downward and the true break-even point is slightly lower than the straight-line model suggests.
- Timing. Break-even is an accounting concept. Cash break-even can arrive much later if customers pay on 60-day terms while suppliers want 30.
- Inventory. The model assumes everything produced is sold. Unsold stock ties up cash and eventually gets discounted, which lowers the effective price.
Questions
What is the break-even formula?
Break-even units = fixed costs ÷ contribution margin, where contribution margin is the selling price minus the variable cost per unit. Break-even revenue is the same fixed costs divided by the contribution margin ratio.
Which costs are fixed and which are variable?
Fixed costs do not change with volume: rent, salaried staff, software, insurance. Variable costs scale with each unit: materials, packaging, shipping, payment processing, per-unit labour. Anything that steps up occasionally, like a second shift, is semi-fixed — treat it as fixed inside the range you are analysing.
What is the margin of safety?
The gap between the sales you expect and the sales you need. A 30% margin of safety means revenue can fall by nearly a third before you start losing money, which is a far more useful risk measure than the break-even point alone.
What if I sell several products?
Use a weighted average selling price and variable cost based on your expected sales mix, or run each product line separately and allocate the fixed costs between them. A single-product model breaks down if the mix shifts.