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Enter your total fixed costs for the period, your selling price per unit and the variable cost of each unit. The calculator finds the contribution margin (price minus variable cost), then divides fixed costs by it and rounds up to whole units, because selling a fraction of a unit is not possible. It also shows break-even revenue, the contribution margin ratio and the split between fixed and variable costs at break-even in the chart. This is a simplified planning model for break-even analysis, not accounting advice.
Every unit you sell does two jobs: first it pays its own variable cost, then the leftover, the contribution margin, chips away at your fixed costs. The break-even point is where those leftovers have exactly covered the fixed costs.
The formula is: break-even units = fixed costs / (price per unit - variable cost per unit), always rounded up, because 333.3 units sold still leaves a small loss. (Some textbooks write it as one word, breakeven; the math is identical.) Worked example: $10,000 of fixed costs, a $50 price and $20 of variable cost per unit. The contribution margin is $50 - $20 = $30. Break-even units = $10,000 / $30 = 333.3, so 334 units. Break-even revenue = 334 × $50 = $16,700. That tells you how many units you need to sell to break even; every sale after that drops its $30 margin straight to profit.
Fixed costs are owed whether you sell 10 units or 1,000: rent, salaried payroll (including your own pay, which owners often forget), insurance, software subscriptions, professional fees and loan interest. Variable costs rise with every sale: materials, packaging and shipping, payment processing and marketplace fees, commissions and returns.
Some costs are mixed, like utilities or hourly labor, so split them: the baseline goes in fixed, the per-unit part in variable. The most common mistake is misclassification. Putting allocated overhead into variable cost double-counts costs that are already in fixed, and forgotten fees like card processing quietly shrink the margin.
Contribution margin per unit = selling price - variable cost per unit. It is the amount each sale contributes toward fixed costs and then profit.
The contribution margin ratio = contribution margin / price, the same idea expressed as a share of revenue. A $30 margin on a $50 price is a 60% ratio, meaning 60 cents of every sales dollar is available to cover fixed costs. Use the per-unit margin when you track sales by quantity, and use the ratio when you think in sales dollars, for example with a mixed catalog where no single unit count is meaningful.
Not every business sells one product at one price. Restaurants, agencies and shops with a mixed catalog use break-even revenue instead: break-even revenue = fixed costs / contribution margin ratio. With $10,000 of fixed costs and a 60% margin ratio, that is $10,000 / 0.60 = $16,667, the same point as the 334 units above, expressed in dollars.
This is also the right lens for a quick sanity check on a pricing change. A 10% price cut comes straight out of the margin, so the volume needed to stand still rises far more than 10%.
Margin of safety = expected sales - break-even sales, often shown as a percentage of expected sales. It measures how far sales can fall before losses start: above 30% is comfortable, 15 to 30% is moderate, and under 15% is thin enough that one slow month erases profit.
To lower the break-even point you have four levers: cut fixed costs, lower the variable cost per unit, raise the price if the market supports it, or shift the sales mix toward higher-margin products. Price usually moves the number most, because every extra dollar of price goes straight into the margin.
Services break even too, just measured in jobs or hours instead of units. Add up monthly overhead: rent, office staff, vehicles, insurance, software, marketing and your own salary. Then divide by the profit each job leaves after materials and direct labor.
Example: $100,000 a year of overhead and $400 of profit per job means 250 jobs a year, about 21 jobs a month or 5 a week. The same math works per billable hour: total payroll plus overhead, divided by billable hours, gives the hourly rate every sold hour must beat just to break even.
Break-even is computed on operating profit before tax, so it does not include income tax: add expected tax into fixed costs if you want a post-tax figure. It is also an accounting-style number. Cash break-even can differ because depreciation is a non-cash cost while loan principal is a cash outflow that never hits the expense line.
The formula assumes price and per-unit cost stay constant and that every unit made is sold. Treat the result as a simplified planning estimate for pricing and targets, not as accounting advice: check big decisions with a qualified professional.
The sales level, in units or revenue, where total revenue exactly equals total costs, so profit is zero. Below it the business loses money; above it every additional unit adds its contribution margin to profit.
Divide total fixed costs by the contribution margin per unit (selling price minus variable cost per unit), and round up to a whole unit. Example: $10,000 / ($50 - $20) = 333.3, so 334 units.
Multiply break-even units by the selling price, or divide fixed costs by the contribution margin ratio. With $10,000 of fixed costs and a 60% margin ratio: $10,000 / 0.60 = $16,667.
The amount each sale leaves after its own variable costs: selling price minus variable cost per unit. It is what pays down fixed costs first and becomes profit after break-even. The ratio form is the margin divided by price.
How far expected sales sit above break-even: expected sales minus break-even sales, often shown as a percentage. A larger margin of safety means sales can fall further before the business slips into a loss.
Cut fixed costs, lower the variable cost per unit, raise the price if the market supports it, or shift sales toward higher-margin products. Price usually moves the number most, because every extra dollar of price goes straight into the margin.
The contribution margin is zero or negative, so no break-even point exists: every sale deepens the loss and no volume can fix it. Raise the price or cut the variable cost before selling more.
No. Break-even is calculated on operating profit before tax. Income tax only bites once you are profitable, so it changes profit targets, not the break-even point itself.
Add the target profit to fixed costs, then divide by the contribution margin per unit: ($10,000 + $5,000) / $30 = 500 units for a $5,000 profit goal.
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