Break-even calculator
Enter your fixed costs, the selling price per unit and the variable cost per unit to see how many units you must sell, and how much revenue that is, before you stop losing money. Add a profit target to see the units needed for it, and add the units you expect to sell to see your profit and margin of safety. A chart shows where the revenue line crosses the cost line.
Your numbers
Costs that stay the same however much you sell: rent, salaries, software, insurance.
What each extra unit costs you: materials, packaging, shipping, payment fees.
Result
- Break-even units
- 800
- Break-even revenue
- $20,000.00
- Contribution margin per unit
- $15.00
- Contribution margin ratio
- 60%
Revenue against cost
- Revenue
- Total cost
- Fixed costs
How it works
- •Enter your fixed costs for the period: rent, salaries and anything else that does not change with sales.
- •Enter the price you charge for one unit and the variable cost of one unit (materials, packaging, shipping, fees).
- •Read the break-even units and revenue, and the contribution margin: the price minus the variable cost, which is what each sale adds towards fixed costs.
- •Optionally enter a profit target and expected sales. The chart shows revenue, total cost and the fixed costs, with a marker where revenue equals cost.
What it does and what it cannot do
- •This is a planning estimate, not financial or accounting advice. Break-even is a rough guide to how much you must sell.
- •It assumes the price and the variable cost per unit stay constant at every volume. Volume discounts, steps in fixed costs and selling several products at different margins are not modelled.
- •Fixed costs are for one period (a month or a year); use the same period for the units. Taxes and the time value of money are ignored.
- •Units are rounded up to a whole number because you cannot sell part of a unit.
- •If the price is not above the variable cost you never break even, and the page says so. Nothing you type is sent anywhere.
Questions
- How do I calculate the break-even point?
- Divide the fixed costs by the contribution margin per unit, which is price minus variable cost. With 12,000 of fixed costs, a price of 25 and 10 of variable cost, the margin is 15 and you break even at 800 units, or 20,000 of revenue.
- What is contribution margin?
- It is what is left of each sale after the variable cost, available to cover fixed costs and then become profit. As a share of the price it is the contribution margin ratio: 60% in the example above.
- How many units do I need for a target profit?
- Add the target profit to the fixed costs and divide by the contribution margin. For a profit of 3,000 in the example that is (12,000 + 3,000) / 15 = 1,000 units.
- What is the margin of safety?
- It is how far your expected sales can fall before you start to lose money, as a share of expected sales. Selling 1,000 units when break-even is 800 gives a margin of safety of 20%.
- What counts as a fixed or a variable cost?
- Fixed costs stay the same however much you sell in the period: rent, salaries, insurance, software. Variable costs rise with each unit: materials, packaging, shipping, payment fees and sales commission.
- Why do I never break even?
- If the price is equal to or below the variable cost, every sale adds nothing towards the fixed costs, so more sales cannot help. Raise the price or lower the variable cost.