What Is Break-Even?
Break-even is the point where total revenue equals total costs — you neither make nor lose money. In units, it's how many items you must sell to cover fixed and variable costs.
Break-even units = Fixed Costs / (Selling Price per unit − Variable Cost per unit)
The denominator is the contribution margin per unit — what each sale contributes toward fixed costs.
Fixed vs Variable Costs
| Type | Examples | Behavior |
|---|---|---|
| Fixed | Rent, salaried staff, insurance | Same whether you sell 0 or 1,000 units |
| Variable | Raw materials, per-unit shipping, sales commissions | Scale with each unit |
Semi-variable costs (utilities with a base + usage) are often simplified into one category for rough break-even analysis.
Worked Example
Fixed costs: $10,000/month
Price per unit: $50
Variable cost per unit: $20
Contribution margin = 50 − 20 = $30 per unit
Break-even units = 10,000 / 30 ≈ 334 units/month
Sell 335 units and you're above break-even. Each unit beyond 334 adds $30 to profit (before taxes).
Break-Even Revenue
You can also express break-even in dollars:
Break-even revenue = Break-even units × Price
Or: Fixed Costs / Contribution Margin Ratio, where margin ratio = contribution per dollar of sales.
Useful when pricing bundles or subscriptions with mixed margins.
Limits of Break-Even Analysis
Assumes linear variable costs and constant price — reality has volume discounts, step-fixed costs (hiring at thresholds), and price elasticity.
Still invaluable for sanity checks before launching a product or setting sales quotas.
How to Use This Break-Even Calculator
Enter fixed costs, price, variable cost per unit, and any target profit. See break-even units and related metrics to set minimum sales targets and evaluate pricing changes.