Break-Even Calculator
Run the break-even calculator for the units that cover your fixed costs, and for the contribution margin, which is the number that drives it.
Break-even
- Break-even $8,000.00 of fixed costs / $27.00 = 296.3, rounded up to whole units: $13,365.00 of revenue.
- 297 units a month
- Contribution margin $45.00 price less $18.00 variable cost. This is what each sale contributes toward fixed costs, and it is the number that drives everything else here, not the gross margin and not the price. The ratio is $27.00 / $45.00: 60% of every sales dollar.
- $27.00 per unit (60%)
- Total contribution margin 400 units x $27.00. It covers the $8,000.00 of fixed costs with $2,800.00 left as profit.
- $10,800.00
- Fixed costs to cover At $27.00 a unit, that takes 297 sales.
- $8,000.00
- For $5,000.00 of profit 185 units beyond break-even. Past break-even, every unit's full contribution drops to profit.
- 482 units ($21,690.00)
- At your current volume 400 units is 103 above break-even.
- $2,800.00 profit
- Margin of safety Sales could fall 25.8% before you reach break-even. Under about 20% is a thin cushion for a business with any seasonality.
- 25.8%
- A 10% price rise 43 fewer. A price rise flows entirely into contribution, which is why it is almost always the strongest lever.
- break-even falls to 254 units
- A 10% cut in variable cost 19 fewer.
- 278 units
- A 10% cut in fixed costs 30 fewer.
- 267 units
- Operating leverage Each 1% change in sales moves profit by about 3.86%. High fixed costs relative to contribution amplify both directions. That is why a business just past break-even is fragile and one well past it is very profitable.
- 3.86x
| Units | Revenue | Variable cost | Contribution | Profit |
|---|---|---|---|---|
| 0 | $0.00 | $0.00 | $0.00 | -$8,000.00 |
| 149 | $6,705.00 | $2,682.00 | $4,023.00 | -$3,977.00 |
| 297 | $13,365.00 | $5,346.00 | $8,019.00 | $19.00 |
| 400 | $18,000.00 | $7,200.00 | $10,800.00 | $2,800.00 |
| 446 | $20,070.00 | $8,028.00 | $12,042.00 | $4,042.00 |
| 594 | $26,730.00 | $10,692.00 | $16,038.00 | $8,038.00 |
- The split between fixed and variable is less obvious than it looks and decides the answer. Salaried staff are fixed; hourly staff scaling with volume are variable. Payment processing fees are variable and often forgotten.
- Break-even is a monthly snapshot at one price. Real businesses have a product mix with different contribution margins, and the blended figure moves as the mix does.
How the Break-Even Calculator works
Break-even is the volume at which revenue exactly covers costs. Below it you lose money, above it you make money, and the arithmetic is one division. It only works once the costs are split correctly, which is where it goes wrong.
FIXED COSTS do not change with volume: rent, salaried staff, software subscriptions, insurance. You pay them whether you sell nothing or everything.
VARIABLE COSTS scale with each unit: materials, shipping, payment processing, per-unit labor, commission.
The split is less obvious than it sounds and it determines the answer. A salaried employee is fixed; an hourly worker whose hours track orders is variable. Payment processing at 2.9% plus 30 cents is unambiguously variable and is routinely left out. Rent on a facility you would need anyway is fixed; overflow storage you rent in busy months is variable.
Then the central concept: CONTRIBUTION MARGIN, which is price less variable cost. At a $45 price and $18 of variable cost, each sale contributes $27 toward fixed costs. Break-even is fixed costs divided by contribution margin: $8,000 / $27 = 297 units a month, which is $13,365 of revenue.
Contribution margin is a different thing from gross margin and more useful here. Gross margin includes some costs that do not vary per unit; contribution margin is strictly what one more sale adds. It is the right number for every incremental decision: whether to take a marginal order, whether a discount is worth it, whether a new channel pays.
Past break-even, the economics change character. Fixed costs are already covered, so each additional unit's entire contribution drops to profit. Selling 400 units instead of 297 produces $2,781 of profit, not a proportional sliver of revenue. This is OPERATING LEVERAGE, and it cuts both ways: the same structure that turns a 35% sales increase into large profit turns a 35% decrease into a large loss. Businesses with high fixed costs and high contribution margins (software, airlines, cinemas) are spectacular above break-even and brutal below it.
Which makes the MARGIN OF SAFETY worth tracking: how far sales can fall before you reach break-even. At 400 units against a 297 break-even that is 26%. Under about 20% is thin for anything with seasonality or customer concentration.
The three levers do not have equal force, and the ranking surprises people. A 10% price rise flows entirely into contribution margin (the full $4.50) and cuts break-even to 254 units. A 10% cut in variable cost adds only $1.80 and gets you to 278. A 10% cut in fixed costs gets you to 267. Price is almost always the strongest lever available, and almost always the last one considered.
The degenerate case is worth naming because it is common and it is fatal. If the contribution margin is negative, with price below variable cost, there is no break-even at any volume. Every sale increases the loss, and more sales make it worse. "We'll make it up on volume" is precisely this situation described optimistically.
Two limits on the model. It assumes one price and one product; a real business has a mix with different contribution margins, and the blended figure moves when the mix does. And it is a monthly snapshot that ignores cash timing. A business can be above break-even on paper and still run out of money if customers pay in 90 days and suppliers want 30.
Break-Even Calculator FAQ
How do I calculate the break-even point?
Fixed costs divided by contribution margin, where contribution margin is price less variable cost per unit. $8,000 of fixed costs with a $27 contribution margin is 297 units. Multiply by price for break-even revenue.
What is contribution margin?
Price less variable cost: what each additional sale contributes toward fixed costs. It differs from gross margin, which includes costs that do not vary per unit, and it is the right figure for any incremental decision: a marginal order, a discount, a new channel.
Which lever lowers break-even most?
Price, almost always. A 10% price rise flows entirely into contribution margin, while a 10% cut in variable cost only adds 10% of that cost. On a $45 price with $18 variable cost, the price rise adds $4.50 of contribution against $1.80 from the cost cut.
What if my contribution margin is negative?
There is no break-even at any volume. Every sale increases the loss, and selling more makes it worse. The only fixes are raising the price or cutting the unit cost. This is exactly the situation 'we'll make it up on volume' describes, and it is arithmetically impossible.