Break-even calculator
Break-even is the number of units you have to sell before the contribution from those sales has covered the fixed costs. Add a target profit when you want the sales that clear the bills and still leave that profit.
Formula
Contribution per unit = price − variable cost Contribution ratio = contribution per unit / price Break-even units = fixed costs / contribution per unit Break-even revenue = break-even units × price Units for a target profit = (fixed costs + target profit) / contribution per unit Margin of safety = (expected units − break-even units) / expected units
Whole units are rounded up when the exact result is not already a whole number, so the last unit is enough to finish covering the fixed costs.
Worked example
Fixed costs are $10,000.00. The price is $50.00 and the variable cost is $30.00, so each sale contributes $20.00. Break-even units are 10,000 / 20 = 500, which is $25,000.00 of revenue. A target profit of $2,000.00 needs (10,000 + 2,000) / 20 = 600 units. If you expect to sell 800, the margin of safety is 300 units, or 37.5%.
FAQ
What is the contribution margin?
Contribution per unit = price − variable cost. Variable cost is the cost that shows up once for every unit you sell, such as materials, packaging, and the postage on that unit. Fixed costs, such as rent and software, stay the same whether you sell one unit or five hundred. The contribution ratio is the contribution divided by the price.
How many units cover the fixed costs?
Break-even units = fixed costs / contribution per unit. Break-even revenue = those units × price, which is the same as fixed costs / contribution ratio. When the exact result is not a whole unit, the page also rounds up, because you cannot sell a fraction of a unit to finish covering a bill.
What if the price is not above the variable cost?
There is no break-even quantity. Each sale loses money, and more sales make the loss larger. Raise the price or lower the variable cost before you use the result. A contribution of zero is the same problem: the price only covers the variable cost and never touches the fixed costs.
How do I include a profit target?
Units for a target profit = (fixed costs + target profit) / contribution per unit. The worked example needs 600 units for a 2,000 profit on top of 10,000 of fixed costs. Leave the target at 0 if you only want the point where profit is zero.
The result is a planning estimate from the numbers on this page. It is not an invoice, a tax filing, or a marketplace statement.