Break Even Calculator
Break Even Calculator
Find how many units you need to sell to cover your costs, the sales revenue that breaks even, the contribution margin, the volume for a target profit and your margin of safety. Or work the other way and find the price that breaks even at the volume you expect.
Cost, volume and profit
Break even units = fixed costs ÷ (price − variable cost per unit), rounded up to whole units because a part unit cannot be sold. Break even revenue = fixed costs ÷ contribution margin ratio. Units for a target profit = (fixed costs + target profit) ÷ contribution per unit. The model assumes one product, or a steady product mix, with price and variable cost per unit that stay the same at every volume. Amounts work in any currency. The CSV, image and printed report contain the values you entered, nothing preloaded.
How to use this tool
Enter your fixed costs for a period, the price you sell one unit for and the variable cost of making or delivering that unit. The break even volume appears at once, with the sales it represents, the contribution each unit makes, a chart of costs against revenue and a table of profit at volumes around the break even point. Add a target profit to see the volume that earns it, or an expected sales figure to see your profit and margin of safety there. Switch the first box to the break even price and the tool works the other way: give it a volume and it finds the lowest price that covers your costs.
The input people most often get wrong is the period. Fixed costs for a month must be matched with a monthly sales volume, not a yearly one. The second is the price: use what you actually keep from a sale, after discounts and without the sales tax or VAT you pass on to the government.
What the calculation is doing
Every unit you sell brings in its price and costs you its variable cost. The difference, the contribution margin, is what that unit adds toward the fixed costs, which have to be paid whether you sell one unit or a thousand. Break even is the volume at which those contributions add up to the fixed costs exactly, so the formula is fixed costs ÷ (price − variable cost).
Revenue and total cost are both straight lines when drawn against volume. Revenue starts at zero and rises by the price per unit; total cost starts at the fixed costs and rises by the variable cost per unit. Because revenue climbs faster, the two lines cross, and that crossing is the break even point. Below it the gap between them is a loss; above it the gap is profit, growing by the contribution margin with every extra unit.
Why price moves break even more than you expect
Break even depends on the contribution per unit, not on the price itself, and the contribution is a small slice of the price. At a price of 50 and a variable cost of 30, raising the price by 5, a 10% rise, increases the contribution from 20 to 25, a 25% rise, and break even falls from 500 units to 400. Cutting the price by 5 does the reverse and worse: the contribution drops to 15 and break even climbs to 667 units, a third more sales just to stand still. That arithmetic is why a 10% discount needs far more than 10% extra volume to pay for itself.
The same multiplier works on profit once you are past break even. At 800 units the business above earns 16,000 of contribution against 10,000 of fixed costs, a profit of 6,000. Sell 10% more, 880 units, and profit rises to 7,600, up 26.7%. The closer you trade to break even, the larger that multiplier, which is also why profit falls away so quickly when sales dip. The margin of safety tells you how much room you have.
The model is a straight line approximation. Fixed costs are only fixed within a range: a second shift, a bigger unit or another van steps them up. Variable costs per unit can fall with bulk buying, and prices can fall as you chase volume. Over the range you actually plan to trade in, the lines are usually close enough; far outside it, work the figures again with the costs that would apply.
Break even for some example businesses
Illustrative monthly figures. The contribution per unit, not the price or the fixed costs alone, sets the volume: the software business carries nearly twice the fixed costs of the food truck yet needs about a third of the sales, because each subscription contributes 43 against 7.50 for a meal.
| Example, a month | Fixed costs | Price | Variable cost | Contribution | Margin | Break even units | Break even sales |
|---|---|---|---|---|---|---|---|
| Coffee cart, cups | 3,000 | 4.5 | 1.5 | 3 | 66.7% | 1,000 | 4,500 |
| Online T shirt shop | 2,000 | 25 | 11 | 14 | 56% | 143 | 3,571 |
| Food truck meals | 8,000 | 12 | 4.5 | 7.5 | 62.5% | 1,067 | 12,800 |
| Handmade candles | 1,200 | 30 | 12 | 18 | 60% | 67 | 2,000 |
| Software subscription | 15,000 | 49 | 6 | 43 | 87.8% | 349 | 17,093 |
| Bakery loaves | 6,000 | 6 | 2.2 | 3.8 | 63.3% | 1,579 | 9,474 |
A worked example you can check on paper
Use the figures the calculator opens with: fixed costs of 10,000, a price of 50 and a variable cost of 30 per unit. The contribution per unit is 50 − 30 = 20, and the contribution margin ratio is 20 ÷ 50 = 40%. Break even is 10,000 ÷ 20 = 500 units, and break even sales are 500 x 50 = 25,000, the same as 10,000 ÷ 40%.
Check it by building the profit and loss at 500 units: sales of 25,000, less variable costs of 500 x 30 = 15,000, less fixed costs of 10,000, leaves exactly 0. For a profit of 5,000, the contributions must cover 10,000 + 5,000 = 15,000, which takes 15,000 ÷ 20 = 750 units. If you expect to sell 800 units, profit is 800 x 20 − 10,000 = 6,000 and the margin of safety is (800 − 500) ÷ 800 = 37.5%.
Now turn it around. To break even on a planned 1,000 units, each unit has to carry its variable cost of 30 plus 10,000 ÷ 1,000 = 10 of the fixed costs, so the break even price is 40. Enter 40 as the price and break even comes out at 1,000 units, closing the loop.
When the answer is not a whole number the calculator rounds up, because 333.3 units does not cover the costs and 334 does. Fixed costs of 5,000 with a price of 25 and a cost of 10 give 5,000 ÷ 15 = 333.33, so you need to sell 334 units.
Mistakes that catch people out
Leaving out your own pay. If you work in the business without a salary, break even only tells you when it stops losing money, not when it pays you. Put a realistic wage in fixed costs, or enter it as the target profit.
Counting a cost twice, or not at all. Delivery charged per order is variable; a delivery van on lease is fixed. Put each cost in one box only, and check the list against a full month of bank statements.
Mixing periods. Annual rent against monthly sales, or a yearly salary against weekly volume, gives an answer twelve or fifty two times out. Pick one period and convert everything to it.
Using the list price. Discounts, refunds, marketplace fees and sales tax all come out of the price before it reaches you. Use the average amount you actually keep per unit, or treat percentage fees as part of the variable cost.
Averaging several products loosely. With more than one product, use the contribution per unit weighted by how many of each you really sell, or work in revenue with the overall margin. If the mix shifts toward low margin items, the break even point rises even though total sales look the same.
Popular calculations
Each opens the calculator with those values filled in, and they can be changed once it is open.
Break even in units
Units for a target profit
Margin of safety at an expected volume
Break even price for a planned volume
How this was checked
The engine uses the standard cost volume profit formulas, the same break even formula given in the U.S. Small Business Administration guidance, fixed costs ÷ (price − variable costs). Every result was checked by rebuilding the profit and loss at the break even volume and confirming it comes to zero, which the working panel repeats for your own figures. Rounding was tested on both sides of whole numbers, so 10,000 ÷ 20 gives 500 units and not 501, while 5,000 ÷ 15 gives 334. The break even price was checked in reverse: the price found for a volume, entered as the price, gives that same volume back.
Every address in the lists above was then opened and checked for a distinct title, the right figures, a chart that renders, and clean CSV, image and print output containing only the values entered, at desktop, tablet and phone widths.
Common questions
How do you calculate the break even point?
Divide your fixed costs by the contribution each unit makes, which is the selling price minus the variable cost per unit. With 10,000 of fixed costs, a price of 50 and a variable cost of 30, each unit contributes 20, so break even is 10,000 ÷ 20 = 500 units.
What is contribution margin?
The part of each sale left after paying the costs that come with that unit, such as materials and shipping. It is price minus variable cost, 20 on a 50 sale costing 30 to make. As a ratio of price it is 20 ÷ 50 = 40%, meaning 40 of every 100 in sales goes toward fixed costs and then profit.
How do you work out break even in sales revenue?
Divide the fixed costs by the contribution margin ratio: 10,000 ÷ 40% = 25,000. It is the same as break even units times price, 500 x 50, and it is the figure to use when you sell many products at different prices but know your overall margin.
What is the margin of safety?
How far your expected sales can fall before you start losing money, as a share of expected sales. Expecting 800 units with break even at 500 gives (800 − 500) ÷ 800 = 37.5%, so sales could drop by more than a third and still cover costs. A negative figure means the forecast is below break even.
Which costs are fixed and which are variable?
Fixed costs stay the same within the period whatever you sell: rent, salaries, insurance, software, loan repayments. Variable costs rise with every unit: materials, packaging, shipping, payment fees and sales commission. Your own pay belongs in fixed costs, or in the target profit, or the break even point will flatter the business.
Why is there no break even point?
If the price is at or below the variable cost, each sale adds nothing toward the fixed costs, or loses money outright, so no volume ever covers them. The only fixes are a higher price, a lower variable cost, or both; selling more makes the loss bigger.
Related Calculators and Reference
- Markup and Margin Calculator: set a price from your cost and the margin you want, then test it here.
- ROI Calculator: the return once the business is past break even, against what you put in.
- Depreciation Calculator: the yearly charge for equipment, which belongs in fixed costs.
- Loan Payment Calculator: the monthly repayment on a startup loan, another fixed cost.
- Discount and Sales Tax Calculator: strip tax out of a price, or see what a discount leaves you.
- Commission Calculator: the commission paid on each sale.
- U.S. Small Business Administration: Break even point: the SBA guidance on break even analysis for a new business.