How to Use This Calculator
- Enter your fixed costs — rent, salaries, insurance, utilities
- Enter your selling price per unit — what you charge customers
- Enter your variable cost per unit — materials, packaging, commission
- Optionally enter current units sold to see margin of safety
- Get break-even units, revenue, and profit at current sales
Break-Even Formula
Break-Even Units = Fixed Costs / Contribution Margin
Contribution Margin = Selling Price - Variable Cost Per Unit
Break-Even Revenue = Break-Even Units × Selling Price
Margin of Safety = Current Sales - Break-Even Sales
Break-Even Example
A small business with $10,000 fixed costs, sells products at $50 each with $20 variable cost per unit.
| Parameter | Value |
|---|---|
| Fixed Costs | $10,000/month |
| Selling Price | $50/unit |
| Variable Cost | $20/unit |
| Contribution Margin | $30/unit |
| Break-Even Units | 334 units |
| Break-Even Revenue | $16,700 |
Fixed vs Variable Costs
| Fixed Costs | Variable Costs |
|---|---|
| Rent / Lease | Raw materials |
| Salaries (permanent staff) | Packaging |
| Insurance | Shipping / delivery |
| Loan repayments | Sales commissions |
| Software subscriptions | Credit card fees |
How to Lower Your Break-Even Point
- Reduce fixed costs — renegotiate rent, cut subscriptions
- Increase selling price — even 5-10% increase reduces break-even significantly
- Reduce variable costs — negotiate with suppliers, buy in bulk
- Improve sales mix — sell more high-margin products
- Automate — replace variable labor costs with fixed technology costs
Frequently Asked Questions
Break-even point is the level of sales where total revenue equals total costs — neither profit nor loss. Below this point your business loses money. Above it you generate profit. Every business must know its break-even point.
Break-Even Units = Fixed Costs / (Selling Price - Variable Cost Per Unit). The denominator is the contribution margin — how much each unit contributes toward covering fixed costs after variable costs are paid.
Contribution margin = Selling Price - Variable Cost Per Unit. It represents how much each unit sold contributes toward covering fixed costs and generating profit. A higher contribution margin means you reach break-even faster.
Fixed costs stay the same regardless of production volume — rent, permanent salaries, insurance, loan repayments. Variable costs change with production — raw materials, packaging, shipping, sales commissions.
Margin of safety = Current Sales - Break-Even Sales. It shows how much sales can drop before you start losing money. A higher margin of safety means lower business risk and more buffer against downturns.