What is a break-even analysis?

A break-even analysis determines the point at which total revenue equals total costs, meaning the business is neither making a profit nor incurring a loss. It helps business owners understand how many units they need to sell, or how much revenue they need to generate, to cover all fixed and variable expenses. This analysis is essential for pricing decisions, financial planning, and evaluating the viability of a new product or business.

What is the contribution margin?

The contribution margin is the difference between the selling price per unit and the variable cost per unit. It represents the amount each unit sold contributes toward covering fixed costs. Once enough units are sold to cover all fixed costs, the contribution margin on each additional unit becomes pure profit. The contribution margin ratio expresses this as a percentage of the selling price.

How can I lower my break-even point?

You can lower your break-even point in three ways: reduce fixed costs (negotiate lower rent, cut overhead), reduce variable costs per unit (find cheaper materials, improve production efficiency), or increase your selling price per unit. Each approach increases the contribution margin or reduces the total costs that need to be covered, resulting in fewer units needed to break even.

What is the difference between fixed and variable costs?

Fixed costs remain the same regardless of how many units you produce or sell. Examples include rent, insurance, salaries, and equipment leases. Variable costs change in direct proportion to production volume. Examples include raw materials, packaging, shipping per unit, and sales commissions. Understanding this distinction is critical for accurate break-even analysis.

Does this calculator account for taxes and other expenses?

This calculator focuses on the basic break-even point before taxes. To account for taxes, you can include tax expenses in your fixed costs or adjust your target revenue accordingly. For a more comprehensive analysis, consider including all relevant costs in either the fixed or variable cost inputs depending on whether they change with production volume.

Break-Even Calculator

Calculate your break-even point in units and revenue. Enter your fixed costs, variable cost per unit, and selling price to find out how many units you need to sell to cover all costs.

How to Use This Break-Even

Enter the following values to calculate your break-even point:

Fixed Costs: The total costs that remain constant regardless of how many units you sell (rent, salaries, insurance, equipment, etc.).
Variable Cost per Unit: The cost to produce or acquire one additional unit (materials, direct labor, packaging, shipping, etc.).
Selling Price per Unit: The price at which you sell each unit to your customers.

The calculator will show the number of units you need to sell to break even, the revenue required, and your contribution margin metrics.

What Is Break-Even?

A break-even analysis is a financial calculation that determines the point at which total revenue equals total costs. At the break-even point, a business has covered all of its expenses but has not yet made a profit. Every unit sold beyond the break-even point generates profit.

Break-even analysis is a foundational tool in business planning. It is used by entrepreneurs evaluating new ventures, product managers setting prices, and financial analysts assessing project viability. Understanding your break-even point helps you set realistic sales targets and make informed pricing decisions.

Formula & Methodology

Key formulas used in this calculator:

Contribution Margin per Unit = Selling Price − Variable Cost per Unit
Break-Even Units = Fixed Costs ÷ Contribution Margin per Unit
Break-Even Revenue = Break-Even Units × Selling Price per Unit
Contribution Margin Ratio = (Contribution Margin per Unit ÷ Selling Price) × 100

Practical Examples

Example 1: Fixed costs = $50,000. Variable cost per unit = $15. Selling price = $40. Contribution margin = $25. Break-even units = 50,000 / 25 = 2,000 units. Break-even revenue = 2,000 × $40 = $80,000.

Example 2: Fixed costs = $120,000. Variable cost per unit = $8. Selling price = $20. Contribution margin = $12. Break-even units = 120,000 / 12 = 10,000 units. Break-even revenue = $200,000.

Break-Even Calculator

How to Use This Break-Even

What Is Break-Even?

Formula & Methodology

Practical Examples

Frequently Asked Questions

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