Break-Even Calculator
Find how many units you need to sell to cover all fixed and variable costs.
Understanding Break-Even Analysis
Break-even analysis determines the point at which total revenue equals total costs. Below this point, the business operates at a loss; above it, at a profit. It is essential for pricing decisions, business planning, and startup projections.
The Formula
Break-Even Units = Fixed Costs / (Price per Unit − Variable Cost per Unit)
The denominator is called the contribution margin: the amount each unit contributes toward covering fixed costs.
Example
| Fixed Costs | Price | Variable Cost | Break-Even |
|---|---|---|---|
| $50,000 | $75 | $30 | 1,112 units |
| $20,000 | $50 | $20 | 667 units |
| $100,000 | $200 | $80 | 834 units |
To lower the break-even point, you can reduce fixed costs, increase the selling price, or decrease variable costs. Each strategy has trade-offs worth evaluating for your specific business.
Frequently Asked Questions
What are fixed costs vs. variable costs?
Fixed costs remain the same regardless of production volume (rent, salaries, insurance). Variable costs change with production (raw materials, packaging, shipping per unit).
What is contribution margin?
Contribution margin is the selling price minus variable cost per unit. It represents how much each unit contributes to covering fixed costs and generating profit. A higher contribution margin means fewer units needed to break even.
How can I lower my break-even point?
Three strategies: reduce fixed costs (negotiate rent, reduce overhead), increase selling price (if the market allows), or decrease variable costs (cheaper materials, more efficient production). Often a combination works best.