How to Calculate Your Break-Even Point
The break-even point is where sales exactly cover costs. This guide explains contribution per unit and how it sets the target.
What is the Break-Even Calculator?
Each unit sold contributes its price minus its variable cost toward fixed costs. Dividing fixed costs by that contribution gives the break-even number of units. Multiplying those units by the price gives break-even revenue. The price must exceed the variable cost, or no number of sales can cover fixed costs.
How to use it
- Enter your fixed costs for the period.
- Enter the selling price per unit and the variable cost per unit.
- Read the break-even units and the break-even revenue.
Worked example
Fixed costs 10,000, price 50, variable cost 30: contribution per unit 20, break-even 500 units, break-even revenue 25,000.
How many units break even with fixed costs of 10,000, a price of 50, and a variable cost of 30?
Break-even is 500 units, giving revenue of 25,000. Each unit contributes 50 minus 30, which is 20, toward fixed costs. Dividing 10,000 by 20 gives 500 units, and 500 times 50 is 25,000.
Frequently asked questions
What are fixed costs?
Fixed costs stay the same regardless of sales volume, such as rent. Variable costs change with each unit made or sold, such as materials.
What if the price is below the variable cost?
Then each sale loses money before fixed costs, so break-even is impossible and the tool says so.