What is the break-even point?
The break-even point is the level of sales at which total revenue equals total cost, so profit is exactly zero. Below it the business makes a loss; every unit sold above it adds its full contribution to profit.
Fixed costs stay the same whatever you sell, such as rent, salaries and insurance. Variable costs rise with each unit, such as materials, packaging and payment fees.
Formulas
Contribution per unit = selling price − variable costBreak-even units = fixed costs ÷ contribution per unitBreak-even revenue = break-even units × selling price
Worked example
With fixed costs of 12,000.00, a price of 50.00 and a variable cost of 30.00, each sale contributes 20.00. You need 600 units, or 30,000.00 in revenue, to break even.
How to use the break-even point calculator
- Enter your figures: fixed costs for the period, selling price per unit and variable cost per unit.
- Read the result. It updates as you type, so there is no button to press.
- Try other numbers to compare scenarios. Reset brings back the example values.
Getting it right
- Use the same period for everything. Monthly fixed costs give the units you must sell each month.
- A higher price or a lower variable cost both raise the contribution per unit and pull the break-even point down.
- Sales above the break-even point are your margin of safety: how far sales can fall before you make a loss.
Frequently asked questions
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. Fixed costs of 12,000 with a contribution of 20 give 600 units.
What counts as a fixed cost?
Anything you pay regardless of how much you sell in the period: rent, salaried staff, software subscriptions, insurance, loan repayments and depreciation.
Why is the unit figure rounded up?
You cannot sell part of a unit, and rounding down would leave you slightly short of covering costs. The exact figure is shown underneath for reference.