Every sale beyond the break-even point contributes profit; every sale before it only pays down fixed costs. Knowing the number helps you set prices, plan sales targets and test whether an idea is viable.
How to use it
- Fixed costs: costs that do not change with volume, such as rent or software.
- Price per unit: what a customer pays.
- Variable cost: material, shipping and payment fees for each unit.
Reading the result
Units are rounded up because you cannot sell part of a unit. If price is not higher than variable cost, there is no break-even point.
Inputs explained
| Field | What to enter |
|---|---|
| Fixed costs | Amount in your currency |
| Price per unit | Amount in your currency |
| Variable cost per unit | Amount in your currency |
What each result means
- Contribution margin per unit = [Price per unit] – [Variable cost per unit]
- Break-even units = ceil([Fixed costs] ÷ [Contribution margin per unit])
- Break-even revenue = [Break-even units] × [Price per unit]
Example values
How the main result changes when Fixed costs changes and everything else stays at the example values above:
| Fixed costs | Break-even units |
|---|---|
| 6,000 | 400 |
| 9,000 | 600 |
| 12,000 | 800 |
| 15,000 | 1,000 |
| 18,000 | 1,200 |
| 24,000 | 1,600 |
Formula
Break-even units = fixed costs ÷ (price − variable cost per unit)Break-even revenue = units × priceWorked example
Fixed costs 12,000; price 40; variable cost 25.
Contribution margin = 40 − 25 = 15 per unit.
Break-even = 12,000 ÷ 15 = 800 units, or 32,000 in revenue.
Key terms
- Fixed cost
- A cost that stays the same regardless of output in the short term.
- Variable cost
- A cost that rises with each unit produced or sold.
- Contribution margin
- Price minus variable cost; what each sale contributes to fixed costs and profit.
Frequently asked questions
What if my price is below variable cost?
You lose money on every sale, so no volume will break even.
How can I lower my break-even point?
Raise price, cut variable cost or reduce fixed costs.
Is break-even the same as payback period?
No. Payback measures time to recover an investment; break-even measures volume.
What formula does the Break-Even Calculator use?
Break-even units = fixed costs ÷ (price − variable cost per unit).