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- The break-even point is where revenue equals all business costs, so profit is zero. Above it you make a profit, and below it you make a loss.
- Break-even units = fixed costs ÷ (selling price − variable cost per unit). Multiply the units by the price to get break-even revenue in dollars.
- With $5,000 in fixed costs, a $25 price and $10 variable cost, you break even at 334 units, or about $8,333 in sales.
- The calculator also finds the break-even price, the units needed for a profit target and your margin of safety.
How to use the break-even calculator
Choose what to find
Pick Units & revenue to see how much you must sell, or Price to see what you must charge at a sales volume you expect.
Enter your fixed costs
Add costs that stay the same however much you sell, such as rent, software and salaries, for one period like a month or a year.
Enter price and variable cost
Use the selling price of one unit and the cost that rises with each unit, including materials, packaging, shipping and fees.
Add a profit target
Open the advanced section to enter a target profit, your expected units and the units you sell per period.
Break-even point formula
The U.S. Small Business Administration describes the break-even point as the point where revenue equals all business costs, and gives it as fixed costs divided by unit selling price minus variable costs. The difference between price and variable cost is called the contribution per unit, because it is what each sale contributes toward fixed costs and then profit.
Break-even formulas
Contribution per unit = price − variable cost per unit
Break-even units = fixed costs ÷ contribution per unit
Break-even revenue = break-even units × price, or fixed costs ÷ contribution margin ratio
Contribution margin ratio = contribution per unit ÷ price
Units for a target profit = (fixed costs + target profit) ÷ contribution per unit
Round units up in practice, because you cannot sell part of a unit.
| What you want | Formula | Result |
|---|---|---|
| Break-even units | Fixed costs ÷ (price − variable cost) | 5,000 ÷ 15 = 333.33, so 334 units |
| Break-even revenue (dollars) | Break-even units × price | 333.33 × $25 = $8,333.33 |
| Units for a target profit | (Fixed costs + target profit) ÷ contribution per unit | 7,000 ÷ 15 = 467 units for $2,000 |
| Break-even price | Variable cost + fixed costs ÷ units sold | $10 + 5,000 ÷ 500 = $20 |
| Margin of safety | (Expected units − break-even units) ÷ expected units | (500 − 333.33) ÷ 500 = 33.3% |
Break-even examples
Example 1: break-even units and dollars
A shop sells a product for $25. Each unit costs $10 to make and ship, and fixed costs are $5,000 a month.
- Contribution per unit $25 − $10 = $15
- Break-even units $5,000 ÷ $15 = 333.33, so 334
- Break-even revenue 333.33 × $25 = $8,333.33
- Contribution margin $15 ÷ $25 = 60%
Selling 334 units covers every cost. Unit 335 is the first one that adds profit.
Example 2: a profit target
The same shop wants $2,000 profit a month.
- Fixed costs + target profit $5,000 + $2,000 = $7,000
- Units needed $7,000 ÷ $15 = 466.67, so 467
- Revenue needed 466.67 × $25 = $11,666.67
Reaching the profit goal needs about 133 more units than breaking even.
Example 3: margin of safety
The shop expects to sell 500 units a month.
- Profit at 500 units 500 × $15 − $5,000 = $2,500
- Margin of safety (500 − 333.33) ÷ 500 = 33.3%
Sales can fall by about one third before the shop stops making a profit.
Example 4: break-even price
The shop is sure it can sell 500 units and wants to know the lowest price that avoids a loss.
- Fixed costs per unit $5,000 ÷ 500 = $10
- Break-even price $10 variable cost + $10 = $20
- Price for a $2,000 profit $10 + $7,000 ÷ 500 = $24
Any price below $20 loses money at that volume.
Break-even chart data
A break-even chart plots revenue and total costs against units sold. The two lines cross at the break-even point. The table shows the numbers behind that chart for the example above: revenue rises $25 per unit, while total costs start at $5,000 and rise $10 per unit.
| Units sold | Revenue | Total costs | Profit or loss |
|---|---|---|---|
| 0 | $0 | $5,000 | −$5,000 |
| 200 | $5,000 | $7,000 | −$2,000 |
| 333.33 (break-even) | $8,333.33 | $8,333.33 | $0 |
| 400 | $10,000 | $9,000 | $1,000 |
| 600 | $15,000 | $11,000 | $4,000 |
| 1,000 | $25,000 | $15,000 | $10,000 |
Lower your break-even point
You reach break-even sooner by raising the price, cutting variable cost or trimming fixed costs. A $2 price rise in the example lifts the contribution from $15 to $17 and cuts break-even from 334 units to 295. Test price changes with the markup calculator and the wholesale pricing calculator.
Sellers can include platform fees in the variable cost. The Etsy profit calculator, the eBay fee calculator and the Amazon FBA profit calculator show those costs per sale. For services, treat one hour or project as a unit and use the freelancer hourly rate calculator to set the price.
Where a break-even calculator helps
Launch a product
Know how many units must sell before a new product pays off.
Set a price
Find the lowest price that covers your costs at a given volume.
Plan a goal
See the units and revenue behind a monthly profit target.
Judge risk
Check how far sales can fall before you lose money.
Break-even assumes a steady price and a steady variable cost per unit, and it ignores taxes, discounts and changes in volume pricing. Costs that rise in steps, such as hiring another employee, need a new calculation at each step. Use the result for planning, not as a guarantee.
Break-even calculator FAQ
What is the break-even point?
It is the level of sales where total revenue equals total costs, so profit is zero. Sales above it make a profit and sales below it make a loss.
How do you calculate the break-even point?
Divide fixed costs by the contribution per unit, which is the selling price minus the variable cost per unit. With $5,000 fixed costs and a $15 contribution, that is 333.33, so 334 units.
How do you calculate break-even in dollars?
Multiply the break-even units by the selling price, or divide fixed costs by the contribution margin ratio. In the example that is $5,000 ÷ 0.60, or $8,333.33.
How do you calculate the break-even price?
Add the variable cost per unit to the fixed costs divided by the units you expect to sell. That is $10 + $5,000 ÷ 500 = $20 in the example.
What are fixed and variable costs?
Fixed costs stay the same however much you sell, such as rent, insurance and salaries. Variable costs rise with each unit, such as materials, packaging, shipping and payment fees.
What is the contribution margin?
It is the selling price minus the variable cost per unit, or that amount as a percentage of the price. It shows how much each sale contributes toward fixed costs and profit.
What is the margin of safety?
It is the percentage by which expected sales can fall before you reach the break-even point. At 500 units against a 333.33 break-even, it is 33.3%.
How many units do I need for a target profit?
Add the target profit to fixed costs and divide by the contribution per unit. For $2,000 profit in the example that is $7,000 ÷ $15, or 467 units.
Can a restaurant or service business use this?
Yes. A restaurant can use the average check as the price and the food cost per guest as the variable cost. A service business can treat one hour, project or client as a unit.
Is this the same as a mortgage break-even?
No. A mortgage break-even compares the upfront cost of points or refinancing with the monthly savings it brings. This calculator covers business sales volume, where fixed costs are spread over units sold.