Break-Even Calculator

Calculate the break-even point for your business. Determine how many units you need to sell or how much revenue you need to cover all costs.

Business Details

$

Rent, salaries, insurance, etc.

$
$

Materials, labor per unit, etc.

Enter your business details and click "Calculate" to find your break-even point.

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Pro Tip

Use break-even analysis to evaluate pricing decisions. Before lowering prices to increase volume, calculate how many more units you need to sell. A small price reduction can dramatically increase the break-even quantity.

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Understanding Break-Even Analysis

Break-even analysis is a fundamental financial tool that determines the point at which total revenue equals total costs. At this point, a business is neither making a profit nor incurring a loss. Understanding your break-even point helps you set pricing, plan production, and evaluate business viability.

Fixed costs remain constant regardless of how many units you produce or sell. Examples include rent, salaries, insurance, and loan payments. Variable costs change with production volume and include raw materials, direct labor, packaging, and shipping per unit.

The contribution margin is the amount each unit sale contributes toward covering fixed costs and generating profit. It equals the selling price minus the variable cost per unit. The higher the contribution margin, the fewer units needed to break even.

Break-even analysis assumes a linear relationship between costs and revenue, constant prices and costs, and that all units produced are sold. While these simplifications mean real-world results may vary, the analysis provides a valuable starting point for business planning.

Break-Even Formula

Break-Even Quantity = Fixed Costs / (Price per Unit − Variable Cost per Unit)

Where:

Fixed Costs = Total costs that do not change with volume (rent, salaries, etc.)

Price per Unit = Selling price for each unit

Variable Cost = Cost that varies with each unit produced

Example

Business with $50,000 fixed costs, $25 price, $10 variable cost:

  • • Contribution margin: $25 - $10 = $15 per unit
  • • Break-even: $50,000 / $15 = 3,334 units
  • • Break-even revenue: 3,334 x $25 = $83,350
  • • Contribution margin ratio: $15 / $25 = 60%

Frequently Asked Questions

What are fixed costs vs variable costs?
Fixed costs stay the same regardless of sales volume (rent, insurance, salaries). Variable costs change with each unit sold (materials, packaging, sales commissions). Some costs are semi-variable, having both fixed and variable components.
How can I lower my break-even point?
You can lower the break-even point by: reducing fixed costs, increasing the selling price, reducing variable costs per unit, or some combination of these. Each approach has trade-offs to consider.
What is the contribution margin ratio?
The contribution margin ratio is the percentage of each sale that goes toward covering fixed costs and profit. A 60% ratio means 60 cents of every dollar in sales contributes to fixed costs and profit.
Does this account for taxes?
This basic break-even analysis does not include taxes. For a post-tax break-even, you would need to increase the target profit by the tax rate: Adjusted Break-Even = Fixed Costs / ((1 - Tax Rate) x Contribution Margin).