Break Even Calculator
Calculate the break-even point for your business — the number of units you need to sell to cover all costs. See also Margin Calculator and ROI Calculator.
How to Calculate Break-Even Point
The break-even point is where total revenue equals total costs — the point at which a business neither makes a profit nor incurs a loss. To calculate it, divide your total fixed costs by the contribution margin per unit (selling price minus variable cost per unit). Fixed costs include rent, salaries, insurance, and other expenses that don't change with production volume. Variable costs are expenses that change with each unit produced, like materials and direct labor.
Break-Even Formula
Break-Even Units = Fixed Costs / (Selling Price − Variable Cost)
Break-Even Revenue = Break-Even Units × Selling Price
Contribution Margin:
CM = Selling Price − Variable Cost per Unit
CM Ratio = CM / Selling Price × 100
Example Calculation
Fixed Costs: $50,000
Variable Cost per Unit: $30
Selling Price per Unit: $50
Contribution Margin = $50 − $30 = $20 per unit
CM Ratio = $20 / $50 = 40%
Break-Even Units = $50,000 / $20 = 2,500 units
Break-Even Revenue = 2,500 × $50 = $125,000
Break-Even Reference Table
| Fixed Costs | Variable | Price | BE Units | BE Revenue |
|---|---|---|---|---|
| $10,000 | $5 | $20 | 667 | $13,340 |
| $25,000 | $15 | $40 | 1,000 | $40,000 |
| $50,000 | $30 | $50 | 2,500 | $125,000 |
| $100,000 | $20 | $60 | 2,500 | $150,000 |
| $200,000 | $50 | $100 | 4,000 | $400,000 |
| $500,000 | $100 | $250 | 3,334 | $833,500 |
Frequently Asked Questions
What are fixed costs vs variable costs?
Fixed costs remain constant regardless of production volume — rent, insurance, salaries, equipment leases. Variable costs change with each unit produced — raw materials, packaging, shipping, sales commissions. Some costs are semi-variable (utilities, maintenance) and may need to be split between fixed and variable components.
What is contribution margin?
Contribution margin is the selling price minus the variable cost per unit. It represents how much each unit sold contributes toward covering fixed costs and generating profit. A higher contribution margin means fewer units needed to break even.
How can I lower my break-even point?
Three ways: (1) Reduce fixed costs — negotiate lower rent, reduce overhead. (2) Reduce variable costs — find cheaper suppliers, improve efficiency. (3) Increase selling price — add value, improve branding. Each approach has trade-offs to consider.
Does break-even analysis work for services?
Yes. For services, the "unit" might be an hour of service, a project, or a client. Fixed costs include office space and salaries. Variable costs include materials, subcontractor fees, or per-project expenses. The same formula applies.
What are the limitations of break-even analysis?
Break-even analysis assumes costs are strictly fixed or variable, prices remain constant, and all units produced are sold. In reality, costs can be semi-variable, prices may change with volume, and inventory can accumulate. It's a useful starting point but should be combined with other financial analysis.