About this calculator
Break-even analysis answers one question: how much must you sell before you start making money? It is the most useful first calculation for any new product or pricing decision, because it turns a guess into a threshold you can measure against.
How it works
Break-even units equal fixed costs divided by the contribution margin per unit, which is price minus variable cost. The margin of safety shows how far above break-even your expected volume sits, and is the number to watch when conditions change.
Frequently asked questions
How do I calculate break-even point?
Break-even units = Fixed costs ÷ (Price per unit − Variable cost per unit). The contribution margin per unit is what each sale contributes toward covering fixed costs. Multiply break-even units by price to get break-even revenue.
What is contribution margin?
Contribution margin is selling price minus variable cost per unit. It represents the money available to cover fixed costs and then profit. A business with a $75 contribution margin on every unit is far more resilient than one at $5.
What is margin of safety?
Margin of safety is how much sales can fall before the business loses money, expressed as a percentage of expected sales. A 40% margin of safety means sales could drop 40% before hitting break-even.
Does break-even change if I raise prices?
Yes. Raising price increases contribution margin per unit, which lowers break-even volume. But if the price increase reduces volume enough, total profit can fall. Model the tradeoff before committing.
Should I include marketing in fixed or variable costs?
Usually fixed, if the spend is planned regardless of sales. Performance marketing that scales with revenue is genuinely variable and should be treated as such, since it consumes a percentage of every sale.
Why is the contribution margin ratio important?
It shows what share of each sales dollar is available to cover fixed costs and profit. Higher is better and more flexible. A 70% margin ratio business is far less exposed to a downturn than a 20% one.