Break-Even Calculator
A break-even calculator tells you exactly how many units you need to sell — or how much revenue you need to generate — before your business stops losing money and starts making a profit. It combines your fixed costs (rent, salaries, insurance) with the contribution margin of each sale, giving you a single, actionable number. Knowing your break-even point is one of the most fundamental steps in pricing a product, planning a launch, or evaluating whether a business idea is financially viable.
Beyond the break-even quantity itself, this calculator visualizes how revenue and total costs evolve as sales volume grows, making it easy to see the point where the two lines cross. You can test different scenarios instantly: what happens if you raise your price, negotiate cheaper materials, or take on higher fixed costs? This kind of sensitivity analysis helps entrepreneurs, managers, and students of cost accounting make decisions grounded in real numbers rather than intuition.
How it works
The break-even point in units equals Fixed Costs ÷ Contribution Margin per Unit, where the contribution margin is the selling price per unit minus the variable cost per unit. For example, with $10,000 in fixed costs, a $50 selling price, and $30 in variable costs per unit, the contribution margin is $20 and the break-even point is 10,000 ÷ 20 = 500 units. Multiplying by the price gives the break-even revenue ($25,000). Any sales above this point generate profit equal to units sold beyond break-even times the contribution margin.
Use cases
- Determining the minimum sales volume needed for a new product to be profitable
- Testing how a price increase or cost reduction changes the break-even point
- Preparing a business plan or investor pitch with realistic sales targets
- Comparing two suppliers or production methods with different fixed and variable costs
Frequently asked questions
How do you calculate the break-even point?
Divide your total fixed costs by the contribution margin per unit (selling price minus variable cost per unit). For example, $8,000 in fixed costs with a $40 price and $24 variable cost gives a $16 margin, so break-even is 8,000 ÷ 16 = 500 units. Multiply by the price to get break-even revenue.
What is the difference between fixed costs and variable costs?
Fixed costs stay the same regardless of how much you produce or sell — rent, salaries, insurance, and software subscriptions are typical examples. Variable costs change in direct proportion to output, such as raw materials, packaging, shipping, and payment processing fees. Separating the two correctly is essential for an accurate break-even calculation.
What is contribution margin and why does it matter?
Contribution margin is the amount each unit sold contributes toward covering fixed costs, calculated as price minus variable cost per unit. Once fixed costs are fully covered, every additional unit's contribution margin becomes pure profit. A higher contribution margin means a lower break-even point and faster profitability.
What happens if my price is lower than my variable cost per unit?
If the selling price is below the variable cost, the contribution margin is negative and there is no break-even point — every sale increases your loss. In that situation you must raise the price, reduce variable costs, or discontinue the product, because selling more volume only makes the problem worse.
How can I lower my break-even point?
There are three levers: reduce fixed costs (cheaper rent, leaner overhead), increase the selling price, or cut variable costs per unit (better supplier terms, more efficient production). Each of these increases the contribution margin relative to fixed costs, so fewer units are needed to reach profitability.