The break-even point is the sales volume at which revenue exactly covers all costs, so the business makes neither a profit nor a loss. It is the first number lenders, investors and new business owners look for, because it turns a pile of costs into a single, concrete sales target. This calculator gives break-even in units and dollars, explains the contribution margin behind it, and charts revenue against total cost.
How to use the break-even calculator
- Enter your fixed costs for the period (a month or a year).
- Enter the selling price per unit and the variable cost per unit.
- Optionally enter expected sales in units to see the profit at that volume, the margin of safety and operating leverage.
- Read the break-even units on the tape. The chart shows where the revenue line crosses the total-cost line; the table shows profit or loss at 25% to 200% of break-even.
Break-even formulas
Worked example
A small bakery has $24,000 of fixed costs a month. It sells boxed cakes for $40, and ingredients, boxes and card fees cost $25 per cake.
Contribution margin = 40 − 25 = $15 a cake; CM ratio = 15 ÷ 40 = 37.5%
Break-even = 24,000 ÷ 15 = 1,600 cakes, or 24,000 ÷ 0.375 = $64,000 in sales
At an expected 2,000 cakes: profit = 2,000 × 15 − 24,000 = $6,000; margin of safety = 20%
Operating leverage = 30,000 contribution ÷ 6,000 profit = 5×, so a 10% drop in sales would cut profit by about 50%
Profit around the break-even point
| Cakes sold | Revenue | Total cost | Profit / loss |
|---|---|---|---|
| 800 | $32,000 | $44,000 | −$12,000 |
| 1,200 | $48,000 | $54,000 | −$6,000 |
| 1,600 | $64,000 | $64,000 | $0 |
| 2,000 | $80,000 | $74,000 | $6,000 |
| 2,400 | $96,000 | $84,000 | $12,000 |
| 3,200 | $128,000 | $104,000 | $24,000 |
Every cake above 1,600 adds its full $15 of contribution to profit; every cake below it adds $15 to the loss.
Lowering your break-even point
- Raise the price. Going from $40 to $43 lifts contribution to $18 and drops break-even to 1,334 cakes.
- Cut variable costs. Saving $2 a cake on packaging has almost the same effect as a $2 price rise, without asking customers to pay more.
- Reduce fixed costs. Every $1,500 of monthly fixed cost removed takes 100 cakes off the break-even target.
- Sell a better mix. With several products, break-even depends on the weighted average contribution margin, so steering sales toward higher-margin items helps.
Limits of break-even analysis
The model assumes a constant price, a constant variable cost per unit and fixed costs that truly stay fixed. In reality, volume discounts, overtime and new equipment change those numbers at higher volumes, so treat results far from your current sales level as rough guides.
To find the volume for a specific profit rather than zero, use the profit goal calculator. The profit calculator shows profit at a single sales level, and the selling price calculator helps set the price in the first place.
Results are planning estimates based on the inputs you provide and are not financial or accounting advice.
Frequently asked questions
How do I calculate the break-even point?
Divide fixed costs by the contribution margin per unit, which is the selling price minus the variable cost per unit. With $24,000 of fixed costs, a $40 price and $25 of variable cost, break-even is 24,000 ÷ 15 = 1,600 units.
How do I find break-even in sales dollars?
Divide fixed costs by the contribution margin ratio (contribution per unit ÷ price). In the example the ratio is 15 ÷ 40 = 37.5%, so break-even sales are 24,000 ÷ 0.375 = $64,000.
What is the margin of safety?
It is how far sales can fall before the business reaches break-even, shown as a percentage of expected sales. Expecting 2,000 units with a 1,600-unit break-even gives a margin of safety of 400 ÷ 2,000 = 20%.
What if the price is lower than the variable cost?
Then every sale loses money and there is no break-even point; more volume only increases the loss. The calculator warns you and asks for a higher price or lower variable cost.
Which costs are fixed and which are variable?
Fixed costs stay the same over the period regardless of sales — rent, salaries, insurance, loan payments, software. Variable costs rise with each unit — materials, packaging, shipping, card fees and sales commissions.