Break-Even Calculator

What this calculator answers

How many units you need to sell, and how much revenue that brings in, before sales cover all your costs for a period. Below that level you lose money; above it, each extra sale adds its contribution margin to profit. It also shows the sales needed for a profit you choose, how far your expected sales sit above or below break-even, and what happens if your price or variable cost moves 5 or 10%.

This page is about break-even for a business that sells products or services. If you want to know how many months a mortgage refinance takes to pay back its closing costs, that is a different calculation: use a refinance calculator.

How to use it

• Fixed costs and how often they recur (weekly, monthly, quarterly or yearly): costs you pay whatever you sell, such as rent, salaries, insurance, software and loan payments. Every result uses this period, so a monthly figure gives break-even sales per month.
• Price per unit: what you receive for one unit, leaving out any sales tax you collect and pass on.
• Variable cost per unit: what one more unit costs you, such as materials, packaging, card fees and commission.
• Target profit (optional): the profit you want in the same period, before income tax.
• Expected sales (optional): how many units you think you will sell in the period. The calculator then shows your profit, margin of safety and the price that would break even at that volume.
• Unit of sale: changes only the wording, so a salon can see “hours” or a café “drinks”.

Results update as you type. The Try buttons load the four cases worked through below: a price increase, the same cart in yearly figures, a price below cost and an hourly service. Press Save for comparison before changing an input to see two or three versions side by side, with the change in break-even sales worked out for you. Continue in the Profit Margin and Markup Calculator takes your price and variable cost there, to see the margin and markup they give or the price a target margin needs.

How to calculate the break-even point

You break even when a period’s sales bring in exactly what the period costs: revenue matches the fixed costs plus the variable costs, and profit is zero. Each unit sold contributes its price minus its variable cost toward the fixed costs, and you break even once those contributions add up to the fixed costs.

$$Q^{*} = \frac{F}{P - V} \qquad S^{*} = \frac{F}{(P - V) \div P} = P \times Q^{*}$$

• $Q^{*}$ is the break-even point in units for the period.
• $S^{*}$ is the break-even point in sales dollars.
• $F$ is the fixed costs for the period.
• $P$ is the price per unit and $V$ the variable cost per unit.
• $P - V$ is the contribution margin per unit, and $(P - V) \div P$ the contribution margin ratio.

Break-even point in units

Divide the fixed costs by the contribution margin per unit, then round up to a whole unit. Rounding down leaves you a fraction of a unit short, which is still a loss. The calculator shows both numbers, and the revenue at the whole-unit count. In a spreadsheet the same step is =ROUNDUP(fixed/(price-variable),0); for the coffee cart below, =ROUNDUP(4200/(4.75-1.35),0) returns 1,236.

Break-even point in sales dollars

Divide the fixed costs by the contribution margin ratio. This gives the same answer as multiplying the exact break-even units by the price, and it is the version to use when you know your margin as a percentage of sales rather than per unit.

What counts as fixed and variable costs?

A cost is fixed when its total stays the same over the period whatever you sell: rent, salaried staff, insurance, equipment leases, subscriptions, loan payments. A cost is variable when it rises with each unit sold: ingredients, materials, packaging, shipping, payment-card fees, sales commission.

Some costs are a mix. A phone plan with a base charge and a per-minute rate splits into a fixed part and a variable part. Others are fixed only up to a point: a second employee or a bigger unit becomes necessary once sales pass a certain level. The break-even point holds only while costs behave as you entered them, so if your break-even sales would need extra staff or space, add those costs and calculate again.

Contribution margin explained

Contribution margin is what each sale leaves after paying for itself: the price minus the variable cost. It is the money that pays the fixed costs first and becomes profit after that. The contribution margin ratio is the same amount as a share of the price, which tells you how many cents of each sales dollar go toward fixed costs and profit.

A thin margin makes the break-even point very sensitive. For the coffee cart below, adding 10 cents to a $3.40 margin (a 2.94% rise) lowers break-even from 1,236 to 1,200 drinks a month.

Worked example: a coffee cart

A coffee cart pays $4,200 a month for its vending spot, van lease, insurance and loan. It sells drinks at $4.75 each, and each drink costs $1.35 in coffee, milk, cup, lid and card fee. The owner wants $3,000 a month in profit and expects to sell about 1,800 drinks a month.

1. Contribution margin: $4.75 − $1.35 = $3.40 a drink.
2. Contribution margin ratio: $3.40 ÷ $4.75 = 0.715789, or 71.58%.
3. Break-even units: $4,200 ÷ $3.40 = 1,235.29 drinks, so 1,236 drinks a month rounded up.
4. Break-even revenue: $4,200 ÷ 0.715789 = $5,867.65 a month. Selling 1,236 whole drinks brings in $5,871.00 and leaves $2.40 of profit.
5. Target profit: ($4,200 + $3,000) ÷ $3.40 = 2,117.65, so 2,118 drinks, or $10,060.50 of sales.
6. At the expected 1,800 drinks: profit = $3.40 × 1,800 − $4,200 = $1,920.00, with a margin of safety of 564.71 drinks (31.37% of expected sales).

Expected sales comfortably cover the costs, but they fall short of the $3,000 target by 318 drinks a month (2,118 − 1,800).

How many units to sell for a target profit

Add the profit you want to the fixed costs and divide by the contribution margin per unit: units = (fixed costs + target profit) ÷ contribution margin. Round up as before. The target is profit before income tax. If you have an after-tax figure in mind, divide it by 1 minus your tax rate first. The calculator also shows the price that would reach the target at your expected sales: $5.35 for the coffee cart, since $1.35 + $7,200 ÷ 1,800 = $5.35.

When you can never break even

If the price is at or below the variable cost, no sales volume breaks even. Each sale either loses money or only pays for itself, so nothing is left for the fixed costs, and selling more makes the loss bigger or leaves it where it is. The Price below cost example charges $1.25 for a drink that costs $1.35: at 1,800 drinks the cart loses $4,380.00 a month ($4,200 of fixed costs plus 10 cents on each drink).

Instead of an error, the calculator says so and tells you what would work: the price has to be above the variable cost, and at your expected sales it gives the lowest price that breaks even. For the cart that is $1.35 + $4,200 ÷ 1,800 = $3.6833, so $3.69 to the cent.

Reading the result

• Break-even point is the whole number of units to sell in the period, with the exact figure it was rounded up from. The Hourly service example charges $60 an hour, has $12 of variable cost per hour and $1,500 a month of fixed costs: $1,500 ÷ $48 = 31.25, so 32 hours a month. For weekly, quarterly or yearly costs it also gives the monthly equivalent. The Yearly figures example, $50,400 a year, breaks even at 14,824 drinks a year, about 1,235.29 a month.
• Break-even revenue is the sales in dollars at the exact break-even point.
• Contribution margin is per unit, with the ratio beside it.
• Sales for your target profit appears when you enter a target.
• Profit at expected sales, margin of safety and break-even price at expected sales appear when you enter expected sales. Margin of safety is how far sales could fall before you start losing money. If your sales are below break-even, the tile says how far short they are.
• Operating leverage is the contribution margin divided by profit. At 1,800 drinks it is $6,120 ÷ $1,920 = 3.19, so a 10% rise in sales, to 1,980 drinks, lifts profit by 31.875%, from $1,920.00 to $2,532.00. It cuts the same way when sales fall.
• The chart plots revenue and total costs against sales volume. The lines cross at the break-even point, with the loss area to the left and the profit area to the right. The table under it lists the same figures at round volumes and at your break-even, target and expected sales, and you can download it as a CSV file.
• The what-if grid reruns the calculation with the price 5% and 10% either side of yours and the variable cost 10% either side. For the cart, a price 10% higher ($5.23) breaks even at 1,083 drinks instead of 1,236; the Price $5.25 example breaks even at 1,077.

Break-even with more than one product (sales mix)

This calculator works on one product at a time, but you can use it for a mix if the mix stays steady. Treat a typical basket as one unit. Suppose the cart sells three drinks for every pastry, and a pastry sells for $3.50 and costs $1.60. One basket then has a price of 3 × $4.75 + $3.50 = $17.75 and a variable cost of 3 × $1.35 + $1.60 = $5.65. Enter those, and break-even is 347.11 baskets, so 348 rounded up: 1,044 drinks and 348 pastries a month.

If the mix shifts toward the lower-margin product, the real break-even rises, so recalculate with the new mix.

Assumptions and limitations

• Fixed costs stay the same at every volume shown, and the price and the variable cost per unit stay the same however many you sell: no bulk discounts, overtime or price cuts.
• Everything made in the period is sold in that period.
• Results are for one product or service, or a steady sales mix treated as one unit.
• Profit is before income tax, loan principal repayments and owner’s drawings unless you included them in fixed costs.
• Money is shown rounded to the cent and volumes to two decimals. The calculation uses the exact figures you enter.
• The result is an educational estimate, not accounting, tax or financial advice.

Common mistakes

• Mixing periods. Yearly rent with a monthly sales estimate gives a break-even 12 times too high. Pick the period in the fixed-costs box and give the target and expected sales for that same period.
• Counting a variable cost as fixed. Card fees, packaging and commissions rise with every sale. Putting them in fixed costs makes the margin look bigger than it is.
• Dividing by a markup or a margin from your accounts. The formula needs the contribution margin: price minus the variable cost of one unit, in dollars, or as a share of the price for break-even sales. Check that any percentage you reuse was worked out that way.
• Rounding down. 1,235.29 drinks means you need 1,236; 1,235 drinks is still a small loss.
• Leaving out costs you pay less often. An annual insurance premium or quarterly software bill is still a fixed cost: include its share for the period.