Break-Even Calculator

What the break-even point tells you

The break-even point is the level of sales at which total revenue equals total costs, so the business neither makes nor loses money. Below it you are funding a loss; above it every extra unit adds profit. The Business Development Bank of Canada defines it as the level of sales where a business's total revenue equals its total expenses. That makes it one of the first numbers worth knowing before you price a product, sign a lease, hire someone or commit to a marketing budget, because it converts a vague worry (“can we afford this?”) into a unit count you can compare with what you realistically sell.

The formula, variable by variable

• Total fixed costs are the costs that do not change when you sell one more or one fewer unit in the period you are analysing: rent, salaried payroll, insurance, software subscriptions, loan payments. The U.S. Small Business Administration advises including fixed costs that are not incurred monthly by converting them into a monthly amount, so every input covers the same time span.
• Selling price per unit is what the customer pays you for one unit, before any costs.
• Variable cost per unit is every cost that rises with each unit: materials, direct labour, packaging, shipping, payment fees. If a cost scales with sales, it belongs here and not in fixed costs.
• Contribution margin = selling price − variable cost per unit. It is the amount each unit contributes toward covering fixed costs and then toward profit.
• Contribution margin ratio = contribution margin ÷ selling price, shown as a percentage.
• Break-even units = fixed costs ÷ contribution margin per unit, rounded up to the next whole unit, because you cannot sell a fraction of a unit.
• Break-even revenue = fixed costs ÷ contribution margin ratio. This calculator derives it from the unrounded unit figure, so it can sit slightly below the whole-unit revenue.

The SBA gives the unit formula as fixed costs divided by (price minus variable costs), and the sales-dollar formula as fixed costs divided by the contribution margin. OpenStax's managerial accounting text writes the same thing as total fixed costs divided by the contribution margin per unit, and fixed costs divided by the contribution margin ratio for dollars.

Worked example with the numbers preloaded above

With $50,000 of fixed costs, a $100 selling price and a $40 variable cost, the contribution margin is $60 per unit and the ratio is 60%. Break-even is $50,000 ÷ $60 = 833.33 units, which rounds up to 834 units. In dollars, $50,000 ÷ 0.60 = $83,333. If you sold exactly 834 units your revenue would be $83,400, a few dollars above the dollar break-even because of the rounding up. Sell 833 units and you are still about $20 short of covering fixed costs; the 834th unit is the one that tips you into profit. OpenStax's own first example makes the same point: with an $80 contribution margin and $18,000 of monthly fixed costs, break-even is 225 units, or $22,500 of sales at a $100 price.

Using it for decisions

• Test a price change. Raise the price to $110 and the contribution margin becomes $70, so break-even falls to 715 units (50,000 ÷ 70 = 714.3). A 10% price rise cut the break-even volume by about 14%, because the extra dollar goes entirely to contribution.
• Test a cost cut. Dropping variable cost from $40 to $35 gives a $65 margin and 770 units. Cutting a fixed cost by $5,000 gives 750 units (45,000 ÷ 60). Compare which lever is realistic for you.
• Add a profit target. To earn $20,000 you need to cover fixed costs plus the target: ($50,000 + $20,000) ÷ $60 = 1,167 units. The tool shows the break-even only, so add your target to the fixed-cost input to get this answer.
• Check your margin of safety. If you expect to sell 1,000 units, the gap above 834 is your cushion before a loss.

The SBA also suggests throwing a little extra, say 10%, into a break-even analysis, which in this example means planning for about 917 units.

Limits and common mistakes

• Misclassifying costs. Putting a semi-variable cost such as shipping or card fees into fixed costs understates the break-even volume. Put per-unit costs where they belong.
• Mixing time periods. Annual rent against monthly volume gives nonsense. Use the same period for fixed costs and for the volume you compare with.
• Assuming one product. The formula assumes a single price and a single variable cost. With several products, break-even depends on the sales mix, and a shift toward lower-margin items raises it. OpenStax notes that multi-product analysis assumes the mix stays constant.
• Ignoring that costs step up. Fixed costs are fixed only within a range of activity. A second shift or a bigger warehouse changes them.
• Price must exceed variable cost. If it does not, the calculator returns an error because no volume can ever reach break-even.

Once you know the break-even point, the next questions are margins and pricing: see the profit margin calculator, the pricing calculator and the cash-flow forecast. Marketplace sellers with per-order fees can use the marketplace break-even calculator instead.

Frequently asked questions

How do you calculate the break-even point?

Divide total fixed costs by the contribution margin per unit, which is the selling price minus the variable cost per unit. The answer is the number of units you must sell to cover all costs. Round it up, because a fraction of a unit cannot be sold. For revenue instead of units, divide fixed costs by the contribution margin ratio.

What is the break-even sales formula in dollars?

Break-even sales in dollars equals fixed costs divided by the contribution margin ratio, where the ratio is the contribution margin per unit divided by the selling price. With $50,000 of fixed costs and a 60% ratio, break-even sales are about $83,333.

What counts as a fixed cost and what counts as a variable cost?

Fixed costs stay the same however many units you sell in the period, such as rent, insurance and salaried payroll. Variable costs rise with each unit, such as materials, packaging, shipping and payment processing fees. Costs that mix both should be split between the two inputs.

Why does the calculator round break-even units up?

You cannot sell a part of a unit, and selling one unit fewer than the exact figure still leaves you short of covering fixed costs. In the preloaded example the exact figure is 833.33 units, so 834 is the first whole number of units at which you are not making a loss.

How do I include a profit target in the break-even calculation?

Add the profit you want to the fixed costs before dividing by the contribution margin. For $50,000 of fixed costs, a $20,000 target and a $60 margin per unit, you need $70,000 divided by $60, which is about 1,167 units.

How can I lower my break-even point?

Raise the price, cut variable cost per unit, or cut fixed costs. Raising the price or cutting variable costs increases the contribution margin, while cutting fixed costs lowers the amount the margin has to cover. The calculator lets you test each change in seconds.

What is the difference between the break-even point and the margin of safety?

The break-even point is the sales level where profit is zero. The margin of safety is the gap between your expected or actual sales and that break-even level. If you expect to sell 1,000 units and break even at 834, you have a cushion of 166 units before a loss.

Does break-even work for services or a single month?

Yes. Treat an hour, a client or a project as the unit, use the average price and the cost that varies with each one, and match the fixed-cost period to the volume period. It works for a month, a quarter or a year as long as everything uses the same period.

Sources

Primary and reference sources used for this page, each opened and checked in October 2026:

• U.S. Small Business Administration: Break-even point — unit and sales-dollar formulas, contribution margin definition, including non-monthly fixed costs as monthly amounts, a buffer of say 10% (retrieved 2026-10)
• OpenStax, Principles of Accounting Volume 2: Calculate a Break-Even Point in Units and Dollars — break-even in units and dollars, contribution margin ratio, the 225-unit example (retrieved 2026-10)
• OpenStax, Principles of Accounting Volume 2: Break-Even Sensitivity Analysis for a Multi-Product Environment — sales mix assumed constant; a shift to low-margin products raises break-even (retrieved 2026-10)
• Business Development Bank of Canada: Break-even point — definition of break-even as revenue equal to total expenses (retrieved 2026-10)