Break-Even Calculator
Calculate your break-even point to determine how many units you need to sell to cover all your costs. This tool helps you understand your contribution margin and revenue targets.
Fixed Costs
Rent, salaries, insurance, etc. (per month or period)
Product Pricing
What you charge per unit
Variable Costs
Materials, labor, shipping per unit
What is Break-Even Point?
Break-even point is the level of sales at which total revenue equals total costs, resulting in neither profit nor loss. It's a critical metric for business planning and pricing decisions.
The Break-Even Formula
The break-even point in units is calculated as: Break-Even Units = Fixed Costs / (Price Per Unit - Variable Cost Per Unit)
The denominator (Price - Variable Cost) is called the contribution margin, representing how much each unit contributes to covering fixed costs.
Understanding Contribution Margin
Contribution Margin is the amount each unit sale contributes to covering fixed costs and generating profit. A higher contribution margin means you need fewer sales to break even.
Contribution Margin Ratio = (Contribution Margin / Price) × 100. This shows what percentage of each dollar of sales contributes to fixed costs and profit.
Using Break-Even Analysis
- Set realistic sales targets
- Evaluate pricing strategies
- Assess the impact of cost changes
- Make informed business decisions
- Determine minimum viable sales volume
Limitations
Break-even analysis assumes that costs can be accurately divided into fixed and variable categories, and that all units produced are sold. In reality, costs may not be perfectly fixed or variable, and sales volumes fluctuate.
Important Disclaimer
This calculator provides estimates for educational and informational purposes only. Results should not be considered as financial or business advice. Actual break-even points may vary based on market conditions, seasonal factors, economies of scale, and other variables not accounted for in this calculation.
Always consult with a qualified accountant, financial advisor, or business consultant before making critical business decisions.