Break-even Calculator
Enter fixed costs, variable cost per unit and selling price per unit to calculate break-even units, break-even revenue and contribution margin.
Enter fixed costs, variable cost per unit and selling price per unit to calculate break-even units, break-even revenue and contribution margin.
Rent, salaries, insurance, depreciation
Materials, packaging, direct labour
Formula
Break-even Units = Fixed Costs ÷ (Selling Price − Variable Cost per Unit) | Break-even Revenue = Break-even Units × Selling Price
The contribution margin per unit (selling price minus variable cost) is the amount each unit contributes toward covering fixed costs. Once fixed costs are covered, each additional unit sold is pure profit at the contribution margin rate.
Worked Example
Fixed costs $20,000/month · Variable cost $12/unit · Selling price $30/unit:
Contribution margin = $30 − $12 = $18 per unit (60% margin)
Break-even units = $20,000 ÷ $18 = 1,112 units
Break-even revenue = 1,112 × $30 = $33,360
Every unit sold above 1,112 contributes $18 to profit. At 1,500 units, profit = (1,500 − 1,112) × $18 = $6,984.
FAQ
Frequently Asked Questions
Use this in your workflow
Once you know your break-even point, use the ROI Calculator to evaluate the return at different sales volumes above break-even. Use the Margin Calculator to cross-check gross profit % from your cost and selling price. Browse all Free Business Calculators.
Worked example: new product launch
A useful starting point before entering your own figures above.
| Input / Output | Value |
|---|---|
| Monthly fixed costs (rent, salaries, insurance) | £4,500 |
| Variable cost per unit (materials, packaging) | £12.00 |
| Selling price per unit | £30.00 |
| Contribution margin per unit (£30 − £12) | £18.00 |
| Contribution margin % | 60% |
| Break-even units (£4,500 ÷ £18) | 250 units/month |
| Break-even revenue (250 × £30) | £7,500/month |
Interpretation: the business must sell at least 250 units each month just to cover its fixed costs. Every unit above 250 contributes £18 profit. At 300 units/month, profit is £900 (50 units × £18). At 400 units, profit is £2,700.
Limitations
This is a single-product, pre-tax break-even model. It assumes a constant selling price and linear variable costs — real businesses often have tiered pricing, volume discounts, and mixed product lines. Depreciation should be included in fixed costs. For a multi-product business, calculate a weighted average contribution margin. These results are for planning purposes only — not financial or accounting advice.
When to use this calculator
- →Testing new product pricing and setting a minimum viable selling price
- →Evaluating whether a business or product line is financially viable
- →Building a business plan or financial model for investors or lenders
- →Assessing the impact of cost increases on profitability and required volume
Frequently asked questions
What is break-even analysis?
Break-even analysis determines the minimum sales volume needed to cover all costs — fixed and variable. At break-even, total revenue equals total costs and profit is zero. Every unit sold above break-even generates profit equal to the contribution margin.
What is the contribution margin?
The contribution margin is the selling price minus the variable cost per unit. It represents the amount each unit contributes toward covering fixed costs, and then to profit once fixed costs are recovered. A £30 price with £12 variable cost gives an £18 contribution margin (60%).
What are fixed costs vs variable costs?
Fixed costs do not change with production volume — rent, salaries, insurance, loan repayments and depreciation are fixed regardless of units produced. Variable costs change with each unit — direct materials, packaging, direct labour per unit and sales commissions are variable.
How do I use break-even for pricing decisions?
If you know your fixed and variable costs, you can test different price points. A higher price reduces the break-even unit count but may reduce demand. A lower price increases the break-even point. Use the calculator to quickly model different price scenarios.
What if the selling price equals the variable cost?
The contribution margin becomes zero — no unit sold contributes anything toward fixed costs. The business can never break even at any volume. The selling price must always exceed the variable cost per unit.
Does break-even analysis account for taxes?
No. This calculator uses a pre-tax, simple break-even model. Depreciation is a fixed cost and should be included in your fixed costs figure. Tax is not included — this is a gross contribution analysis.