A break even calculator shows how many units you must sell, and how much revenue you need, before your sales cover all your costs. The break even calculator uses this formula: Contribution margin = price per unit – variable per unit. Units = fixed costs / contribution when contribution > 0. Revenue at break-even = units × price. The UI displays ceil(units) as whole units. With $10,000 of fixed costs, a $50 price and $30 of variable cost per unit, you break even at 500 units, or $25,000 of sales.
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How to use the break even calculator
- Enter fixed costs for the period.
- Enter the selling price per unit.
- Enter the variable cost per unit.
- Read the break-even units and revenue.
What formula does the break even calculator use?
- Contribution margin per unit = price − variable cost per unit
- Break-even units = fixed costs ÷ contribution margin per unit
- Break-even revenue = break-even units × price, or fixed costs ÷ contribution margin ratio
- Contribution margin ratio = (price − variable cost) ÷ price
- The tool rounds units up, since you cannot sell part of a unit
Break even calculator worked example
| Fixed costs | Price | Variable cost | Margin/unit | Margin ratio | Units | Revenue |
|---|---|---|---|---|---|---|
| $10,000 | $25 | $10 | $15 | 60.0% | 667 | $16,667 |
| $10,000 | $50 | $30 | $20 | 40.0% | 500 | $25,000 |
| $5,000 | $20 | $12 | $8 | 40.0% | 625 | $12,500 |
| $24,000 | $80 | $50 | $30 | 37.5% | 800 | $64,000 |
| $50,000 | $199 | $79 | $120 | 60.3% | 417 | $82,917 |
With $10,000 of fixed costs, a $50 price and $30 of variable cost, each unit contributes $20, so you need $10,000 ÷ $20 = 500 units, or $25,000 of sales, to break even. With the tool’s default inputs ($25 price, $10 variable) you need 666.7 units, rounded up to 667.
Fixed vs variable costs
Fixed costs stay the same whatever you sell in the period: rent, insurance, salaries, software subscriptions and loan payments. Variable costs rise with each unit: materials, packaging, shipping, payment processing fees and sales commissions. Some costs are mixed, such as utilities; split them as best you can. Use the same period for everything, usually a month or a year.
Using the result
- Pricing: try a higher price to see how much the break-even point falls, but remember volume may drop.
- Cost cuts: lowering variable cost raises the margin on every unit.
- Targets: to reach a profit goal, add it to fixed costs: (fixed costs + target profit) ÷ margin per unit.
- Margin of safety: expected sales minus break-even sales shows how far sales can fall before you make a loss.
Limits
The model assumes one product, a constant price and constant variable cost per unit. With several products, use a weighted average margin based on your sales mix. If price is at or below variable cost, there is no break-even point, and the tool says so.
How long until you break even
To turn units into time, divide the break-even units by expected sales per month. Keep the periods consistent: if fixed costs are $10,000 a month and you need 500 units, you must sell 500 units every month just to cover costs; selling 400 a month means a loss each month. To find how long a project takes to pay back, use the total fixed costs for the whole project and divide the units needed by expected monthly sales. For a start-up, also recover one-off launch costs by adding them to fixed costs in the break even calculator and spreading them over the period you plan to repay them. The SBA suggests estimating startup costs as part of your business plan.
Estimates for planning only. Check important figures with an official source or a qualified professional.
A second example: a small café
Suppose a café has monthly fixed costs of $12,000 for rent, wages and insurance, sells coffee at an average of $4.50 and spends $1.50 per cup on beans, milk and cups. Each cup contributes $3.00, so the break even calculator gives 4,000 cups a month, or about 133 a day over 30 days. If the owner raises the average price to $4.80, the margin rises to $3.30 and the break-even point falls to about 3,637 cups, or about 121 a day. Running both prices through the break even calculator shows how much a small price change can lower the sales needed each day, before you consider how customers might react to the increase.
Related converters and calculators
Related calculators:
- Profit margin calculator: margins
- Margin calculator: margin
- ROI calculator: return
- Business loan calculator: financing
Sources
SBA: Calculate your startup costs; SBA: Write your business plan.
Questions about this calculator
What is the break-even formula?
Fixed costs ÷ (price − variable cost per unit).
How many units at $10,000 fixed, $50 price, $30 cost?
500 units, or $25,000 of revenue.
What if price is below variable cost?
There is no break-even point; every sale adds to the loss.
How do I include a profit target?
Add the target to fixed costs before dividing.
Why are units rounded up?
You cannot sell part of a unit, so the tool rounds up.
Check the assumptions and units before relying on a result. Financial, tax and health estimates do not replace advice for your individual circumstances.
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