How we calculate the break-even point
The break-even point is the number of units that exactly covers all costs: no profit, no loss.
Use the Break-Even Point CalculatorFormula
contribution margin = price − variable cost
break-even point (units) = fixed costs ÷ contribution margin
break-even revenue = units × price
Variables
- fixed costs
- Expenses that don't change with volume: rent, salaries, software.
- price
- Selling price of one unit.
- variable cost
- Cost incurred per unit sold: raw materials, shipping, gateway fees.
Step-by-step calculation
- We calculate how much each unit contributes toward covering fixed costs.
- We divide fixed costs by that contribution.
- We round up, since you can't sell a fraction of a unit.
Worked example
Inputs
- Fixed costs: $5,000
- Price: $50
- Variable cost: $20
Calculation
contribution margin = 50 − 20 = 30
5,000 ÷ 30 = 166.67
167 units per month, equivalent to $8,350 in revenue.
Common mistakes
- Classifying a cost as fixed when it actually varies with sales.
- Using a price that includes taxes without netting them out first.
- Ignoring that a negative contribution margin makes break-even impossible.
Frequently asked questions
What if the contribution margin is zero or negative?
There is no break-even point: every sale increases the loss. You need to raise the price or cut the variable cost.
All values are in US dollars (US$). Results are estimates and do not replace professional advice.