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Break-even calculator: how it works
Break-even units = fixed costs ÷ (price per unit − variable cost per unit). With $12,000 fixed costs, a $50 price and $20 variable cost, each sale contributes $30, so you break even at 400 units.
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Break-even, worked through
A small bakery pays $12,000 a month in rent, wages and equipment leases. A celebration cake sells for $50 and costs $20 in ingredients and boxes. Contribution per cake = $30; contribution margin = 60%. Break-even = $12,000 ÷ $30 = 400 cakes, or $20,000 of sales a month. To earn $6,000 profit on top it needs ($12,000 + $6,000) ÷ $30 = 600 cakes.
How to use the break-even calculator
- Pick the currency and enter fixed costs for the period.
- Enter the price per unit and the variable cost per unit.
- Optionally add a target profit.
- Read the break-even units and revenue.
Ways to lower the break-even point
- Raise the price: at $55, contribution rises to $35 and break-even falls to 343 units.
- Cut variable cost per unit through better supplier terms or less waste.
- Reduce or delay fixed costs.
- Sell more higher-contribution products in the mix.
Questions people ask
What is the break-even formula?
Break-even units = fixed costs ÷ (price per unit − variable cost per unit). With $12,000 fixed costs, a $50 price and $20 variable cost, each sale contributes $30, so you break even at 400 units.
How do I calculate break-even revenue?
Divide fixed costs by the contribution margin ratio, (price − variable cost) ÷ price. $12,000 ÷ 0.6 = $20,000.
What is the difference between fixed and variable costs?
Fixed costs stay the same whatever you sell in the period: rent, salaries, software, insurance. Variable costs rise with each unit: materials, packaging, shipping, payment fees, sales commission.
What if the price is below the variable cost?
Then every sale loses money and there is no break-even point. Raise the price or cut the variable cost first.