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Business Calculator
Break-Even Calculator
Calculate how many units you need to sell, or how much revenue you need to generate, to cover fixed and variable costs. You can also estimate the sales required to reach a target profit.
Business Costs and Pricing
Enter your fixed costs, selling price, and variable cost per unit.
What These Inputs Mean
Fixed costs are expenses that generally stay the same regardless of sales volume, such as rent, salaries, insurance, and certain software costs.
Variable cost per unit is the cost that changes with each unit sold, such as materials, packaging, transaction fees, or direct production costs.
Contribution margin is the amount left from each sale after variable costs. That amount contributes toward paying fixed costs and then profit.
How the Break-Even Calculator Works
Contribution margin per unit is calculated by subtracting variable cost per unit from selling price per unit.
Exact break-even units are calculated by dividing total fixed costs by contribution margin per unit. The displayed unit count is that result rounded up to the next whole unit.
Theoretical break-even revenue uses the contribution margin ratio to estimate the total sales dollars required to cover fixed costs. It is the exact unit count multiplied by the selling price, so it can differ from the rounded-up unit count multiplied by the selling price.
The target-profit calculation adds your desired profit to fixed costs before calculating the required unit sales and theoretical revenue. Target-profit units are also rounded up, and theoretical target-profit revenue stays at the exact point.
How to Use the Break-Even Calculator
Start by entering your total fixed costs. These are expenses that generally stay the same regardless of how many units you sell, such as rent, insurance, software, administrative salaries, and other overhead.
Next, enter the selling price for one unit of your product or service and the variable cost associated with producing or delivering one unit.
The difference between selling price and variable cost is your contribution margin per unit. This is the amount each sale contributes toward covering fixed costs and eventually producing profit.
You can also enter a target profit amount. The calculator will estimate how many units you need to sell and how much revenue you need to generate to reach that profit goal.
Use the results to compare different pricing, cost, and sales scenarios before making business decisions.
Break-Even Example
Suppose a business has $10,000 in fixed costs, sells a product for $50, and has a variable cost of $20 per unit.
The contribution margin is $30 per unit. Dividing $10,000 by $30 gives exact break-even units of 333.333. Rounded up, the business needs to sell 334 whole units. Revenue from those 334 units would be $16,700.
Theoretical break-even revenue is about $16,666.67, the sales dollars at the exact break-even point. It differs from $16,700 because the unit count is rounded up and the revenue is not the revenue of those rounded units. The results round displayed dollar amounts to the nearest dollar.
If the business wants to earn a $5,000 target profit, exact target-profit units are 500, so the rounded-up count is also 500. Theoretical target-profit revenue is $25,000.
Frequently Asked Questions
What is the break-even point?
The break-even point is the level of sales where total revenue equals total costs. At that point, the business is neither making a profit nor operating at a loss.
What are fixed costs?
Fixed costs are expenses that generally do not change directly with sales volume, such as rent, insurance, software subscriptions, administrative salaries, and certain other overhead expenses.
What are variable costs?
Variable costs change with the number of units sold or produced. Examples may include product materials, packaging, sales commissions, shipping, and transaction costs.
What is contribution margin?
Contribution margin is the selling price per unit minus the variable cost per unit. It represents the amount from each sale that is available to cover fixed costs and profit.
Why does the selling price need to be higher than variable cost?
If the variable cost of each unit equals or exceeds the selling price, each additional sale does not contribute toward covering fixed costs. A positive contribution margin is required to calculate a practical break-even point.
Can I use break-even analysis for a service business?
Yes. A service business can treat one appointment, project, billable hour, subscription, or other service unit as the unit being sold. The same fixed-cost and variable-cost principles can then be applied.
Related Business Calculators
Use these additional BizToolLab calculators to evaluate startup costs, margins, business profitability, and investment returns.
Important
This calculator provides estimates for educational and planning purposes only. Actual break-even performance can vary based on pricing changes, discounts, product mix, taxes, financing, capacity limits, labor, overhead allocation, returns, and other business conditions.