Break Even Calculator
Calculate your break-even point - the point where total revenue equals total costs. Essential for business planning and pricing decisions.
Cost Information
Break-Even Analysis
At Break-Even Point
Profit at Different Sales Levels
| Units Sold | Revenue | Total Cost | Profit/Loss |
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What is Break-Even Analysis?
Break-even analysis determines the point at which total revenue equals total costs. Below this point, you lose money; above it, you make a profit.
Formula: Break-Even Units = Fixed Costs ÷ (Price - Variable Cost)
Understanding the Components
- Fixed Costs: Costs that don't change with production (rent, salaries)
- Variable Costs: Costs per unit produced (materials, direct labor)
- Contribution Margin: Price minus variable cost - what contributes to covering fixed costs
About the Break Even Calculator
Break-even analysis tells you how many units you need to sell to cover all costs. Below break-even, you lose money. Above it, you make money. This page covers the formula, the variables that move it most, and how to use break-even for pricing decisions.
The Formula
Break-even units = Fixed costs ÷ (Price per unit − Variable cost per unit). Break-even revenue = Break-even units × Price.
Worked Example
Coffee shop with $8,000/month fixed costs (rent, salaries, utilities). Coffee priced at $4.50, variable cost $1.50. Contribution margin: $3.00. Break-even: $8,000 ÷ $3 = 2,667 cups/month, or ~89 cups/day.
Fixed vs variable costs
Fixed: rent, base salaries, insurance, software. Stays same whether you sell 1 unit or 1,000. Variable: materials, hourly labour, commissions, shipping. Scales with units sold.
The price-volume trade-off
Lower price = higher break-even units. A $1 price drop on a $5 product can require selling 30-50% more units to break even. Run the math before promotional pricing.
Margin of safety
Margin of safety = Actual sales − Break-even sales. The cushion you have if revenue drops. 30-50% margin of safety is healthy. Below 20% is risky.
Common Mistakes
- Treating salaries as variable when they're fixed (you pay them regardless of sales volume).
- Forgetting to include owner's salary or expected return in fixed costs.
- Calculating break-even in revenue but planning capacity in units. Use units for operational decisions.
Frequently Asked Questions
How does break-even change with price increase?
Up: revenue per unit rises, contribution margin grows, break-even units falls. Watch for elasticity — higher prices may drop demand.
Is break-even the same as no-loss?
Yes — break-even is exactly zero profit. Add a target profit to fixed costs to find sales needed to achieve that profit.
This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Consult a licensed professional before making significant financial decisions.