Break-even Point Calculator
Sell 500 units ($25,000) to cover your costs. Every unit after that is profit.
What is Break-even point?
The break-even point is the level of sales at which revenue exactly covers costs and profit is zero, calculated in units as fixed costs divided by the contribution margin per unit (price minus variable cost).
Below it you are making a loss; above it every additional unit is profit. It answers the most basic planning question: how much do I need to sell before the venture pays for itself.
The figure hinges on the contribution margin, the amount each sale leaves over after its own variable cost. The larger that margin, the fewer units you need to cover your fixed costs.
How to calculate Break-even point
Break-even units = Fixed costs ÷ (Price − Variable cost)
- Add up fixed costs. Costs that do not change with volume: rent, salaries, software. The example uses 10,000.
- Find the contribution per unit. Subtract variable cost from price. 50 minus 30 is a 20 contribution per unit.
- Divide fixed costs by the contribution. 10,000 divided by 20 is 500 units to break even.
- Convert to revenue if needed. Multiply break-even units by price. 500 units at 50 is 25,000 in break-even revenue.
Worked example
Fixed costs of 10,000, a 50 price per unit and a 30 variable cost per unit.
| Fixed costs | $10,000 |
|---|---|
| Price per unit | $50 |
| Variable cost per unit | $30 |
| Result | 500 units |
Each unit contributes 20 toward fixed costs, so 500 units (25,000 in revenue) cover the 10,000 of fixed costs. Every unit sold beyond 500 is pure profit.
How to improve Break-even point
- Raise the price, which widens the contribution per unit and lowers break-even.
- Cut variable costs per unit through better sourcing or efficiency.
- Trim fixed costs so there is less to cover before you profit.
- Shift the mix toward higher-contribution products to reach break-even on fewer total sales.
Frequently asked questions
- What is the break-even point and how do you calculate it?
- The break-even point is the sales volume at which total revenue exactly covers total costs, so profit is zero. In units it is fixed costs divided by the contribution margin per unit, which is price minus variable cost per unit. 10,000 of fixed costs against a 20 contribution per unit breaks even at 500 units.
- What is contribution margin?
- Contribution margin is what each unit leaves over after its own variable cost: price minus variable cost per unit. A unit sold at 50 with a 30 variable cost contributes 20 toward fixed costs. Once enough units have contributed to cover all fixed costs, you reach break-even and every unit after that is profit.
- What is a good break-even point?
- Lower is generally better, since it means you start profiting sooner, but there is no universal target: it depends on your fixed costs and pricing. The useful test is whether break-even sits comfortably below the volume you can realistically sell. Compare it to your sales forecast, not to a fixed benchmark.
- How do fixed and variable costs differ?
- Fixed costs stay the same regardless of how much you sell, such as rent, salaries and software. Variable costs rise with each unit, such as materials, shipping and payment fees. Break-even uses fixed costs as the total to cover and variable cost to work out each unit contribution.
- What if the price is below the variable cost?
- Then you can never break even. Each unit loses money before fixed costs are even considered, so selling more only deepens the loss. The contribution margin must be positive, meaning price above variable cost, for a break-even point to exist at all.