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Break-Even Calculator

How many units cover your fixed costs — and how far your expected sales sit above that line.

Enter your fixed costs, price and cost per unit.

Rent, salaries, insurance — what you pay whether you sell anything or not.

Materials, shipping, card fees.

Optional. Break-even is simply the case where this is zero.

Optional. Compares what you expect against what you need.

Exact calculation. Given your inputs, this is the answer — no estimation involved.

How this calculator works

Every sale contributes something towards the costs you pay regardless of volume. That contribution is the price less the variable cost of making one more — materials, shipping, card fees. Divide the fixed costs by it and you have the number of units where you stop losing money.

The number that matters is contribution margin, not profit, and the distinction is more than semantic. There is no profit at all until the fixed costs are covered, so every unit before break-even is still losing money overall while moving you towards the point where it stops.

A profit target is the same calculation with a bigger number on top: break-even is simply the case where the target is zero.

If the variable cost meets or exceeds the price there is no break-even at any volume, and selling more makes it worse. That is reported as a plain answer rather than a number, because "you cannot get there from here" is the most important thing this calculator can tell you.

The formula

Exactly what happens to your numbers, step by step.

  1. Contribution

    contribution margin = price − variable cost per unit

  2. Break-even

    units   = fixed costs ÷ contribution margin
revenue = units × price

  3. With a profit target

    units = (fixed costs + target) ÷ contribution margin

  4. Margin of safety

    how far expected sales sit above break-even

A worked example

$12,000 of fixed costs, selling at $40 a unit with $15 of variable cost, expecting 600 sales.

What you enter

Fixed costs
$12,000
Price
$40
Variable cost
$15
Expected sales
600 units

The working

Contribution per unit
$40 − $15 = $25
Break-even
$12,000 ÷ $25 = 480 units
Break-even revenue
$19,200
Profit at 600
600 × $25 − $12,000 = $3,000
Margin of safety
120 units, or 20%

480 units to break even; $3,000 profit at 600

The margin of safety is the figure to sit with. Sales can fall 20% before this business stops covering its costs — which sounds comfortable until you notice that a 20% miss is an ordinary quarter, not a catastrophe.

Assumptions

Every result here rests on these. Change your inputs and the result changes with them.

  • Price and variable cost per unit are constant at every volume.
  • Fixed costs do not change across the range being considered.
  • Everything produced is sold, with no inventory building up.
  • One product, or an average unit that genuinely represents the mix.

What this cannot tell you

  • Real costs are rarely this tidy. Volume discounts lower the variable cost as you grow, and fixed costs step up when you need another shift, another machine, or a bigger unit.
  • It assumes a single product. A business selling several has a break-even that depends on which ones sell, so the mix has to be stable for the answer to hold.
  • Timing is not modelled. Covering costs across a year says nothing about whether the cash arrives before the bills do.
  • It says nothing about whether the volume is achievable. Break-even at 480 units is only useful next to an honest view of whether 480 is a plausible number.

Questions people ask

How do I calculate the break-even point?

Divide the fixed costs by the contribution margin — the price of one unit less what it costs to make one more. $12,000 of fixed costs against $25 of contribution needs 480 units.

What is contribution margin?

What each sale contributes towards your fixed costs. It is not profit: there is no profit until the fixed costs are fully covered, so it is better read as progress towards the point where profit starts.

What is a good margin of safety?

There is no universal figure, but under 20% is uncomfortably thin — a bad quarter turns the profit into a loss. The more variable your sales, the more headroom you want.

What if I cannot break even at any volume?

That happens when the variable cost per unit meets or exceeds the price, and it means every sale loses money. Volume cannot fix it; the price or the unit cost has to change. This calculator says so rather than returning a number.

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Sources and review

This calculator uses standard arithmetic with no external rules or published rates, so there is nothing to cite beyond the formulas shown above.

Methodology version 1.0.0 · Last reviewed