Break-Even Calculator
Rent, salaries, insurance — costs that don't change with volume
Materials, commissions — costs that scale with each unit
Break-Even Units
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Break-Even Revenue
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Contribution Margin/Unit
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Contribution Margin Ratio
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Enter fixed costs, variable cost, and selling price above
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What is Break-Even Analysis?
Break-even analysis answers the most fundamental business question: "How much do I need to sell before I start making money?" It identifies the exact sales volume where total revenue equals total costs — the point where you transition from losses to profits. Every unit sold beyond break-even generates pure profit (minus variable costs).
How It Works
Example
A small bakery has monthly fixed costs of $3,000. Each loaf of bread costs $2 to make (flour, labor variable) and sells for $8.
- Contribution margin: $8 − $2 = $6 per loaf
- Break-even: $3,000 ÷ $6 = 500 loaves per month
- Break-even revenue: 500 × $8 = $4,000
Practical Tips
- Reduce break-even by cutting fixed costs, raising prices, or lowering variable costs — any combination works.
- A high contribution margin ratio means more of each dollar of revenue goes toward covering fixed costs and profit.
- Add a safety margin: target selling 20–30% more than break-even so unexpected downturns don't send you into losses.
- Break-even is not profit — it's the floor. Plan for the revenue you need, not just the minimum.
Frequently Asked Questions
What is the break-even point?
The break-even point is the number of units you must sell (or revenue you must generate) so that total revenue exactly equals total costs — meaning zero profit and zero loss. Selling below the break-even point means a loss; selling above it means profit.
How is break-even calculated?
Break-Even Units = Fixed Costs ÷ Contribution Margin per Unit, where Contribution Margin = Selling Price − Variable Cost per Unit. Break-Even Revenue = Break-Even Units × Selling Price.
What is contribution margin?
Contribution margin is the portion of each sale that is available to cover fixed costs after variable costs are paid. Once enough units are sold to cover all fixed costs, every additional unit sold contributes directly to profit.
What if my variable costs are higher than selling price?
If variable cost per unit exceeds or equals the selling price, the contribution margin is zero or negative — meaning there is no break-even point and every unit sold increases losses. You must raise prices or reduce variable costs before break-even analysis is meaningful.