Break-Even Calculator
Calculate the break-even point in units and revenue from fixed costs, variable costs, and price.
What Is the Break-Even Calculator?
The Break-Even Calculator determines the sales volume at which total revenues equal total costs — the break-even point. Enter fixed costs, variable cost per unit, and selling price to find the number of units and revenue needed to cover all costs and start earning profit.
Formula
How to Use
Enter total fixed costs (rent, salaries, equipment — costs that don't change with sales volume). Enter variable cost per unit (materials, direct labor — costs that scale with production). Enter selling price per unit. The calculator shows break-even units, break-even revenue, contribution margin, and a profit/loss chart.
Example Calculation
Fixed costs: $10,000/month. Variable cost per unit: $15. Selling price: $25. Contribution margin = $25−$15 = $10/unit. Break-even units = $10,000÷$10 = 1,000 units. Break-even revenue = 1,000×$25 = $25,000. Selling 1,500 units: profit = (1,500−1,000)×$10 = $5,000.
Understanding Break-Even
Break-even analysis is a fundamental tool in business financial planning that answers the most basic question: how much do I need to sell to cover my costs? Every business has fixed costs (rent, insurance, salaries) that must be paid regardless of sales, and variable costs (materials, commissions) that scale with output. The break-even point is where these are exactly covered by revenue.
The contribution margin — selling price minus variable cost — is the engine of break-even analysis. Each unit sold contributes this amount toward covering fixed costs. Once fixed costs are fully covered, every additional unit contributes pure profit. Understanding contribution margin helps businesses make pricing decisions, evaluate product lines, and assess the profit sensitivity of different business scenarios.
Break-even analysis has important limitations: it assumes constant prices and costs (linear model), ignores strategic factors, and works best for single-product businesses. For multi-product businesses, a weighted average contribution margin is used. Despite these limitations, break-even is indispensable for business planning, loan applications, startup viability assessment, and pricing strategy.
Frequently Asked Questions
What is the contribution margin?
Contribution margin = Selling price − Variable cost per unit. It represents how much each unit sold contributes toward covering fixed costs and then generating profit. A higher contribution margin means faster break-even.
What is contribution margin ratio?
Contribution margin ratio = Contribution margin ÷ Selling price. It shows what fraction of each revenue dollar covers fixed costs and profit. CMR × Revenue = Contribution to fixed costs.
How do taxes affect break-even analysis?
The basic break-even ignores taxes. For after-tax break-even: Target units = (Fixed Costs + Target Profit/(1−Tax Rate)) ÷ Contribution Margin.
What is operating leverage?
High operating leverage means high fixed costs relative to variable costs. Near break-even, small revenue increases produce large profit jumps. Away from break-even, losses also multiply — high leverage is risky.
Is this calculator free?
Yes, completely free with no registration required.