Break-even Calculator
The break-even point is the level of sales at which total revenue exactly equals total costs — the threshold where a business stops making a loss and begins generating profit. Every unit sold below the break-even point represents a net loss; every unit sold above it contributes to profit. Knowing your break-even point is one of the most important pieces of information when evaluating whether a new product, service, or business venture is financially viable.
Enter your fixed costs (the costs that remain constant regardless of output — rent, salaries, insurance, software subscriptions), the variable cost per unit (costs that increase with each unit produced or delivered — materials, packaging, direct labour, shipping), and the selling price per unit. The calculator finds the break-even quantity and the break-even revenue, along with the contribution margin per unit — the amount each sale contributes toward covering fixed costs before profit begins.
Break-even analysis has wide practical applications: assessing whether a new product can realistically reach profitability at your expected sales volume, understanding how a price increase or cost reduction changes your break-even threshold, evaluating the minimum viable scale for a business or project, and stress-testing financial projections. It is most powerful when used alongside margin and ROI analysis to build a complete picture of a venture's economics before committing resources.
Formula
Break-even Units = Fixed Costs ÷ (Selling Price − Variable Cost per Unit) Break-even Revenue = Break-even Units × Selling Price
The break-even point is where total revenue equals total costs. Each unit sold contributes its selling price minus its variable cost toward covering fixed costs. Divide fixed costs by this contribution margin to find the number of units needed.
Worked Examples
Frequently Asked Questions
What are fixed costs?▾
Fixed costs remain constant regardless of how much you produce or sell — rent, salaries, insurance, loan repayments, and equipment leases. They must be paid even if you sell zero units. In break-even analysis, fixed costs are the total burden that must be recovered before any profit is possible.
What are variable costs?▾
Variable costs change in proportion to production or sales volume — raw materials, packaging, direct labour per unit, shipping, and sales commissions. They increase as you produce and sell more. Keeping variable costs low increases your contribution margin and reduces the number of units you need to break even.
What if selling price equals variable cost?▾
If the selling price equals (or is lower than) the variable cost per unit, each sale contributes nothing — or loses money — toward covering fixed costs. Break-even becomes mathematically impossible. You must either raise the selling price above variable cost or reduce variable costs below the selling price to achieve any positive contribution margin.
How can I lower my break-even point?▾
Reduce fixed costs (renegotiate rent, cut overheads), lower variable costs per unit (source cheaper materials, improve processes), or increase the selling price (if the market allows). Each of these increases the contribution margin per unit, meaning fewer units are needed to cover fixed costs. Small improvements in all three simultaneously can dramatically reduce the break-even threshold.
What is contribution margin?▾
Contribution margin is the selling price per unit minus the variable cost per unit. It represents how much each unit sold contributes toward covering fixed costs. Once enough units are sold to cover all fixed costs (the break-even point), additional units generate the contribution margin as pure profit. Contribution margin ratio = contribution margin ÷ selling price.
How do I calculate break-even revenue?▾
Break-even revenue = break-even units × selling price per unit. Alternatively, use the contribution margin ratio: break-even revenue = fixed costs ÷ contribution margin ratio, where the ratio is (selling price − variable cost) ÷ selling price. Both approaches give the same answer — total sales value needed to cover all costs.
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All calculations are for informational purposes only. They should not replace professional financial, tax, or legal advice. Always consult a qualified professional for decisions affecting your finances or business.