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The break-even point is the sales level where a business stops losing money and starts making it — where total revenue exactly covers total costs. Below it you're running a loss; above it, every sale is profit. It's the first number any product or pricing decision should answer.
Enter your fixed costs, selling price and variable cost per unit to find it.
Break-Even Calculator: step-by-step worked example
- Fixed costs
- 12,000.00
- Selling price per unit
- 45.00
- Variable cost per unit
- 18.00
- 1
Contribution margin per unit
Contribution = Price − Variable cost
45.00 − 18.00 = 27.00
- 2
Contribution margin ratio
Ratio = Contribution ÷ Price × 100
27.00 ÷ 45.00 × 100 = 60%
- 3
Break-even units
Units = Fixed costs ÷ Contribution
12,000.00 ÷ 27.00 = 444.4444 units
- 4
Break-even revenue
Revenue = Units × Price
444.44 × 45.00 = 20,000.00
- Revenue:0.00 → 40,000.00
- Total cost:12,000.00 → 28,000.00
Good to know: Round a fractional result up — you only start making a profit from the next whole unit. Fixed costs are rent, salaries, subscriptions; variable costs are materials, shipping, fees.
Break-Even Calculator — how it works
The break-even formula
The key idea is the contribution margin — how much each unit contributes toward fixed costs after its own variable cost:
| Step | Formula |
|---|---|
| Contribution margin | price − variable cost per unit |
| Break-even units | fixed costs ÷ contribution margin |
| Break-even revenue | break-even units × price |
Fixed vs variable costs
Fixed costs stay the same regardless of how much you sell — rent, salaries, insurance. Variable costs rise with each unit — materials, packaging, per-sale fees. Splitting them correctly is the whole game; misclassifying a cost throws off the break-even point.
Why price above variable cost is essential
If the price doesn't exceed the variable cost per unit, the contribution margin is zero or negative and there is no break-even point — every sale loses money no matter the volume. The calculator requires price > variable cost for exactly this reason.
Where it helps
Pricing a new product, deciding whether a sales target is realistic, planning a launch, or judging how many bookings a service needs. Lowering fixed costs or raising the contribution margin (higher price or lower variable cost) both cut the break-even point. To then set a price for a target profit margin, use a margin calculator.
Worked example
You have 1,000 in monthly fixed costs, sell each unit for 25, and each unit costs 15 to make. The contribution margin is 25 − 15 = 10 per unit. Break-even units = 1,000 ÷ 10 = 100 units, and break-even revenue = 100 × 25 = 2,500. Sell the 101st unit and you're 10 in profit.
Frequently asked questions
How do I calculate the break-even point?+
Divide fixed costs by the contribution margin (price minus variable cost per unit). With 1,000 fixed costs and a 10 margin per unit, break-even is 100 units.
What is the contribution margin?+
It is the selling price minus the variable cost per unit — the amount each sale contributes toward covering fixed costs and then profit. A 25 price with 15 variable cost has a 10 margin.
What is the difference between fixed and variable costs?+
Fixed costs (rent, salaries) don’t change with sales volume; variable costs (materials, per-unit fees) rise with each unit sold. Break-even analysis needs them separated.
How do I lower my break-even point?+
Cut fixed costs, raise the price, or reduce the variable cost per unit. Any of these increases the share of each sale that goes toward covering fixed costs.
What is break-even revenue?+
It is the sales income at the break-even point: break-even units × price. Below it the business runs a loss; above it, sales generate profit.
About this page
- Publisher:
- Kalkoro — Teknolojig Bilişim Teknolojileri A.Ş., İstanbul
- Written by:
- Furkan Tur — Editor (Finance, loans, tax, accounting, commerce, legal, employment)
- Reviewed by:
- Ahmet Tur — Editor
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