Break-Even Calculator
Enter your fixed costs, variable cost per unit, and selling price to find how many units you need to sell to break even.
How Break-Even Calculator works
Break-even formula
Break-even units = Fixed Costs ÷ Contribution Margin per Unit. Contribution margin = Selling Price − Variable Cost per Unit. Break-even revenue = Fixed Costs ÷ Contribution Margin Ratio.
Fixed vs variable costs
Fixed costs remain constant regardless of production volume: rent, salaries, insurance, software subscriptions. Variable costs change with output: materials, direct labour, packaging, payment processing fees. Classifying costs correctly is essential for an accurate break-even analysis.
Contribution margin
The contribution margin is the amount each unit sold contributes towards covering fixed costs — and then profit once fixed costs are covered. A high contribution margin means fewer units are needed to break even.
Limitations of break-even analysis
Break-even analysis assumes a constant selling price and variable cost per unit, and that all units produced are sold. In practice, volume discounts, bulk purchase savings, and price changes affect the analysis. It is best used as a planning tool rather than a precise forecast.
Frequently asked questions
What is a break-even point?
The break-even point is the level of sales at which total revenue equals total costs. Below break-even, the business makes a loss; above it, a profit.
How do I reduce my break-even point?
Either increase your selling price, reduce variable costs per unit, or reduce fixed costs. Reducing fixed costs has the most direct impact since it directly lowers the numerator of the break-even formula.
What is contribution margin?
Contribution margin is the selling price minus variable cost per unit. It represents how much each unit sold contributes to covering fixed costs. Once fixed costs are covered, each additional unit contributes directly to profit.
How is break-even different from profit?
At break-even, total profit is exactly £0 — revenue equals total costs. To calculate the units needed to hit a specific profit target, add the target profit to fixed costs before dividing by the contribution margin.
Related calculators