How this break-even calculator works
The break-even point is where your business neither makes a profit nor a loss: total revenue exactly equals total costs. Selling one unit beyond it produces profit; selling one fewer leaves a loss. Knowing this threshold helps you set prices, plan sales targets and judge whether a product is viable.
Costs split into two kinds. Fixed costs — rent, salaries, insurance — stay the same no matter how much you sell. Variable costs — materials, packaging, per-unit shipping — rise with each unit. The difference between the price and the variable cost of one unit is the contribution margin: the money each sale contributes toward covering fixed costs and then profit.
Once fixed costs are covered, every further unit's contribution margin becomes profit. So the break-even point in units is fixed costs ÷ contribution margin per unit, and break-even revenue is that unit count multiplied by the price. The contribution margin ratio (contribution margin ÷ price) shows what share of each sales dollar is left after variable costs. To hit a target profit, add it to fixed costs before dividing: (fixed costs + target) ÷ contribution margin.
Reference note: results are estimates that assume a single product (or constant average), a constant selling price and that variable cost per unit does not change with volume. Currency is shown in US dollars. This is general business math, not financial advice.
Frequently asked questions
- What is the break-even point?
- It is the level of sales at which total revenue equals total costs, so profit is zero. Below it you make a loss; above it you make a profit. It can be measured in units sold or in sales revenue.
- How do I calculate the break-even point?
- Divide total fixed costs by the contribution margin per unit (price minus variable cost). That gives the units you must sell to cover all costs. Break-even in dollars is those units times the price per unit.
- What is contribution margin?
- Contribution margin per unit is the price minus the variable cost per unit — what each sale contributes toward fixed costs and then profit. The contribution margin ratio is that figure divided by the price, shown as a percentage.
- What is break-even in dollars?
- It is the sales revenue at the break-even point. Multiply break-even units by the price, or divide fixed costs by the contribution margin ratio. It is the revenue needed to cover all costs.
- How do fixed and variable costs differ?
- Fixed costs stay the same whatever you sell, such as rent or salaries. Variable costs change with volume, such as materials or per-unit shipping. Only variable costs are subtracted from price to get the contribution margin.
- How do I reach a target profit?
- Add your target profit to fixed costs, then divide by the contribution margin per unit. The result is the units you must sell to cover costs and earn that profit. This tool does it automatically when you enter a target.