Break-Even Calculator
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Break-Even Units500
Break-Even Revenue$25,000.00
Contribution Margin$20.00
This break-even calculator tells you how many units a business must sell, and how much revenue it must generate, before it covers all its costs and starts turning a profit. It works from the contribution margin, the amount each sale contributes toward fixed costs after its own variable cost is paid. Enter your fixed costs, the price per unit, and the variable cost per unit, and it returns the break-even point in units, the matching revenue, and the per-unit contribution margin.
Formula
Break-even units = ⌈Fixed costs / (Price − Variable cost)⌉
- Fixed costs
- Total costs that do not vary with units sold
- Price
- Selling price per unit
- Variable cost
- Cost incurred per unit produced or sold
- ⌈ ⌉
- Round up to the next whole unit
How it works
- Enter total fixed costs (rent, salaries, and other expenses that do not change with volume), the selling price per unit, and the variable cost per unit.
- The calculator subtracts variable cost from price to get the contribution margin per unit; the selling price must exceed the variable cost for a break-even point to exist.
- It divides fixed costs by the contribution margin and rounds up to whole units, then multiplies by the price to report the break-even revenue you must reach.
Worked example
Fixed costs of $50,000, a $40 selling price, and a $15 variable cost per unit.
- Contribution margin = 40 − 15 = $25 per unit.
- Break-even units = 50,000 ÷ 25 = 2,000 units (rounded up to a whole unit).
- Break-even revenue = 2,000 × 40 = $80,000.
The business breaks even at 2,000 units, or $80,000 in revenue, with each unit contributing $25 toward covering the fixed costs.
Frequently asked questions
- What is the contribution margin?
- It is the selling price minus the variable cost per unit, representing the money each sale contributes toward fixed costs and, beyond break-even, profit. A higher contribution margin means fewer units are needed to break even.
- Why must the price exceed the variable cost?
- If the price is equal to or below the variable cost, every unit sold loses money or contributes nothing toward fixed costs, so the business can never break even. The calculator requires a positive contribution margin for a valid result.
- Why is the break-even point rounded up?
- You cannot sell a fraction of a unit and still fully cover fixed costs, so the units figure is rounded up to the next whole number. This guarantees the rounded quantity generates at least enough contribution to break even.