📊 Break Even Calculator
Calculate your break even point
Rent, salaries, insurance, etc.
Materials, labor, shipping per unit
How to Use This Calculator
Enter Fixed Costs
Input your total fixed costs - these are costs that don't change with production volume (rent, salaries, insurance, equipment leases, etc.).
Enter Variable Cost Per Unit
Input the variable cost per unit - costs that change with each unit produced (materials, direct labor, shipping, etc.).
Enter Selling Price Per Unit
Input the price at which you sell each unit. This must be greater than the variable cost per unit for the calculation to work.
Calculate and Review
Click calculate to see your break-even point in units and revenue, plus contribution margin and other key metrics.
Formula
Contribution Margin:
Contribution Margin = Selling Price - Variable Cost per Unit
Break-Even Point (Units):
Break-Even Units = Fixed Costs / Contribution Margin
Break-Even Point (Revenue):
Break-Even Revenue = Break-Even Units × Selling Price
Contribution Margin Ratio:
CM Ratio = (Contribution Margin / Selling Price) × 100%
Example 1: Basic Calculation
Fixed Costs: $10,000, Variable Cost: $15/unit, Selling Price: $25/unit
Contribution Margin: $25 - $15 = $10 per unit
Break-Even Units: $10,000 / $10 = 1,000 units
Break-Even Revenue: 1,000 × $25 = $25,000
CM Ratio: ($10 / $25) × 100% = 40%
Example 2: Service Business
Fixed Costs: $50,000/month, Variable Cost: $20/service, Selling Price: $100/service
Contribution Margin: $100 - $20 = $80 per service
Break-Even Units: $50,000 / $80 = 625 services per month
Break-Even Revenue: 625 × $100 = $62,500 per month
CM Ratio: ($80 / $100) × 100% = 80%
About Break Even Calculator
The Break Even Calculator is an essential business planning tool that helps you determine the point at which your business neither makes a profit nor incurs a loss. This critical financial metric shows exactly how many units you need to sell (or how much revenue you need to generate) to cover all your costs. Understanding your break-even point is crucial for pricing decisions, business planning, and financial forecasting.
When to Use This Calculator
- Business Planning: Determine if your business model is viable and how much you need to sell
- Pricing Decisions: Set prices that ensure profitability above the break-even point
- Financial Forecasting: Project profitability based on expected sales volumes
- Investment Analysis: Evaluate business opportunities and investment requirements
- Cost Management: Understand how changes in costs affect your break-even point
- Goal Setting: Set realistic sales targets based on your cost structure
Why Use Our Calculator?
- ✅ Comprehensive Analysis: Shows break-even in both units and revenue
- ✅ Key Metrics: Calculates contribution margin and CM ratio for deeper insights
- ✅ Visual Results: Clear display of critical break-even information
- ✅ Profit Insights: Shows profit potential above break-even point
- ✅ Instant Calculation: Quick break-even analysis without manual computation
- ✅ Free Tool: No cost for essential business planning
Common Applications
- Startup Planning: Determine if a new business idea is financially viable
- Product Launch: Calculate how many units must be sold to cover development and marketing costs
- Service Businesses: Determine how many clients or services are needed to break even
- Expansion Decisions: Evaluate whether expanding operations will be profitable
- Cost Reduction Analysis: See how reducing costs affects the break-even point
Tips for Best Results
- Accurate Fixed Costs: Include all fixed expenses - rent, salaries, insurance, equipment leases, etc.
- Realistic Variable Costs: Base variable costs on actual production data, not estimates
- Market Price: Use realistic selling prices based on market research and competition
- Regular Updates: Recalculate as costs or prices change to keep break-even accurate
- Multiple Scenarios: Calculate break-even for different price points to find optimal pricing
Frequently Asked Questions
What is the break-even point?
The break-even point is the sales volume (in units or revenue) at which total revenue equals total costs, resulting in zero profit or loss. Above this point, you make a profit; below it, you incur a loss.
Why is contribution margin important?
Contribution margin shows how much each unit sold contributes to covering fixed costs and generating profit. It's calculated as selling price minus variable cost. Once fixed costs are covered, contribution margin equals profit per unit.
What if my selling price equals variable cost?
If selling price equals variable cost, you'll never break even because you have no contribution margin to cover fixed costs. You must sell for more than variable cost to have any chance of profitability.
How do I reduce my break-even point?
You can reduce break-even by: (1) reducing fixed costs, (2) increasing selling price, (3) reducing variable costs, or (4) a combination. Reducing fixed costs has the most impact since they're spread over all units.
Can break-even be calculated in dollars instead of units?
Yes! Break-even revenue = Fixed Costs / (1 - Variable Cost Ratio), or simply Break-Even Units × Selling Price. This calculator shows both units and revenue for complete analysis.
What's the difference between break-even and target profit?
Break-even is zero profit. Target profit adds the desired profit to fixed costs: Units for Target Profit = (Fixed Costs + Target Profit) / Contribution Margin. This lets you calculate sales needed for specific profit goals.