Break-even calculator
Break-even units are fixed costs divided by contribution per unit. On the figures above, 5,000 of fixed costs against a contribution of 15 gives 333.33, rounded up to 334 units, and 8,333.33 of revenue. The 3,000 target profit needs 8,000 of contribution, which is 533.33 units — so 534, rounded up for the same reason.
How to find your break-even point
The output to read first is the contribution margin, not the unit count, because it tells you which lever moves the answer fastest. Take the figures above. Raise the price ten per cent, from 25 to 27.50, and contribution goes from 15 to 17.50, dropping break-even from 333.3 units to 285.7: a fall of one seventh. Cut the variable cost by the same ten per cent instead, from 10 to 9, and contribution reaches only 16, so break-even falls to 312.5, or one sixteenth. The two levers look symmetrical and are not, because a price rise adds its whole value to contribution while a cost cut adds only its own smaller share. On a thin contribution margin the asymmetry gets sharper still.
The unit rows round up and the money rows do not, on purpose. Both unit counts are whole units, because a partial one does not cover its share: 333 units of contribution comes to 4,995 against 5,000 of fixed cost, and 533 comes to 7,995 against a target that needs 8,000, so the answers are 334 and 534. Revenue at break-even and units per day are computed from the exact fraction instead, which is why revenue reads 8,333.33 and not 334 × 25 — the extra two-thirds of a unit is the margin by which 334 clears the line rather than sits on it. Multiply the rounded count yourself if you want the takings at the volume you would actually sell.
Units per day divides by 30.44, the average length of a month. The row therefore assumes the fixed costs you entered are monthly. Enter an annual rent and the daily figure is out by a factor of twelve, which is the most common way to get a wrong answer from this page.
Splitting costs into fixed and variable is a modelling decision rather than a fact about the costs, and the model quietly assumes both lines are straight. Real fixed costs come in steps: one van covers a volume, and the next unit past that needs a second van, so the break-even chart has a jump in it that a single division cannot show. Real variable costs bend too, downward through volume discounts on materials and upward through overtime. The straight-line answer is a good approximation near your current volume and gets worse the further you extrapolate from it.
Contribution margin is also not gross margin, though the two get quoted interchangeably. Contribution subtracts only the costs that vary with volume; a reported gross margin usually nets off some fixed production overhead as well, so it comes out lower for the same product. Using a gross margin figure in this panel understates contribution and overstates the volume you need.
Two things the count cannot carry on its own. First, price is treated as independent of volume, and it usually is not: selling twice as many normally costs a discount, more advertising, or both, and advertising that scales with volume belongs in the variable column rather than the fixed one. Second, depreciation is a fixed cost but not a cash outflow, so a business can be below its accounting break-even and still not run out of money. If the question is survival rather than profitability, strip the non-cash items out of the fixed costs and read the answer again.
What people use it for
- Deciding whether a product line is viable
- Working out the sales needed to cover a new hire
- Modelling a price change against a cost reduction
- Preparing a business plan
- Finding the volume that funds a target profit rather than merely covering costs
- Separating a cash break-even from an accounting one
Questions
Fixed costs divided by contribution per unit, where contribution is price minus variable cost.
Because the unit count is rounded up and the revenue is not: 333.33 × 25 is 8,333.33, where 334 × 25 is 8,350. The gap is the two-thirds of a unit by which 334 clears the line rather than landing exactly on it. Multiply the rounded count yourself for the takings at the volume you would actually sell.
Anything that does not change when you make or sell one more: rent, salaries, insurance, software subscriptions. Materials, packaging, shipping and payment fees are variable.
Whichever it behaves like. A retainer is fixed. Performance spend that rises with every sale is variable, and putting it in the fixed column flatters the contribution margin.
No. Contribution takes off only volume-driven costs; a reported gross margin usually also absorbs fixed production overhead, so it is the lower of the two.
Any, as long as fixed costs, price and volume all refer to the same one. The units-per-day row assumes a month, dividing by 30.44.
Add it to fixed costs before dividing, which is what the target row does. Set it to zero and that row repeats the break-even.
Usually price. A ten per cent price rise adds its whole value to contribution; a ten per cent cost cut adds only ten per cent of the smaller number, so it moves break-even less than half as far.
Use a weighted average contribution margin, weighted by the unit mix you actually sell, and recompute it whenever the mix moves. A mix shift changes the break-even without any price or cost changing.
Yes: fixed costs divided by the contribution margin ratio gives break-even revenue directly. That version is the practical one when the product mix is too wide to talk about units.
How far current sales sit above break-even, as a share of current sales. At 500 units against a 334 break-even it is about a third, meaning sales could fall by a third before the business stops covering its costs.
Because it raises operating leverage. When most of the cost is fixed, profit swings hard on volume in both directions, so the same business is both the fastest to scale and the fastest to fall over.
No. A single division draws a straight line, and a cost that jumps when you add a van, a shift or a machine puts a step in the real chart. Recompute on each side of the step.
For an accounting break-even, yes. For a cash break-even, take it out, along with anything else already paid for. The cash figure is the lower of the two and answers a different question.
Not in the break-even itself, since there is no profit to tax at that point. For a target profit, decide whether your target is before or after tax and gross it up first if it is after.
Contribution is negative and there is no break-even at any volume: every extra sale loses money faster. The answer is a price change or a cost change, not more sales.
It works where you can name a unit, such as an hour, a seat or a job. Where the unit is fuzzy, use the revenue form with a contribution margin ratio instead.
No. The calculation runs in your browser and nothing leaves the page.