About the Break-Even Calculator
The break-even point is the sales volume at which revenue exactly covers total costs, so profit is zero. It is the first number to check when you write a business plan, price a new product, or work out how many more units you need to sell after rent goes up. Besides the break-even units and sales, this calculator shows the units needed for a target profit, the profit and margin of safety at your expected volume, and a profit table by volume.
How to use
- Enter your monthly fixed costs โ rent, salaries, insurance, loan payments, subscriptions.
- Enter the variable cost per unit (materials, packaging, shipping, card and marketplace fees) and the price per unit before sales tax.
- The break-even units and sales appear instantly with the contribution margin. Enter a target profit to see the units needed to reach it.
- Optionally enter expected sales to see your profit and margin of safety, and use the table to see profit at different volumes.
Break-even formulas
| Measure | Formula | Example |
|---|---|---|
| Contribution margin per unit | price โ variable cost | $20 โ $8 = $12 |
| Contribution margin ratio | contribution margin รท price | 60% |
| Break-even units | fixed costs รท contribution margin | $10,000 รท $12 = 833.3 โ 834 |
| Break-even sales | fixed costs รท CM ratio | $10,000 รท 0.6 = $16,666.67 |
| Units for target profit | (fixed costs + target) รท CM | $15,000 รท $12 = 1,250 |
| Margin of safety | (actual โ break-even units) รท actual | 16.7% at 1,000 units |
Because you can't sell a fraction of a unit, break-even units are rounded up.
Example: a coffee shop
A coffee shop pays $6,000 rent, $9,000 in wages and $1,500 in utilities and other overhead โ $16,500 in fixed costs a month. A latte sells for $5.50 and costs $1.30 in coffee, milk, cup and card fees, a contribution margin of $4.20. It breaks even at $16,500 รท $4.20 โ 3,929 drinks a month, or about 131 a day over 30 days.
How to lower your break-even point
- Raise prices: the contribution margin grows immediately โ watch the effect on volume.
- Cut variable costs: negotiate supplier prices, cheaper packaging or lower-fee sales channels.
- Cut fixed costs: review rent, fixed salaries and recurring subscriptions.
FAQ
What counts as fixed and variable costs?
Fixed costs don't change with volume in the short term: rent, salaried staff, insurance, depreciation. Variable costs rise with every unit sold: materials, packaging, shipping, sales commissions and payment fees. Split mixed costs such as utilities into a base (fixed) and usage (variable) part.
Should sales tax be included?
No. Enter prices and costs without sales tax; the tax is collected for the state and doesn't affect profit.
How do I calculate break-even for several products?
Use a weighted average price and variable cost based on your sales mix, or calculate the contribution margin ratio from total revenue and total variable costs and divide fixed costs by it to get break-even sales.
What if the price is below the variable cost?
Then every unit loses money and you can never break even, no matter how much you sell. The calculator shows a warning in that case.