Break-Even Calculator

1. Enter your Fixed Costs. These are costs that stay the same regardless of how many units you produce or sell: rent, salaries, insurance, equipment leases, software subscriptions. For example, a small manufacturer might have $50,000 per month in fixed costs.
2. Enter Variable Cost per Unit. These costs scale directly with production: raw materials, packaging, direct labor, shipping per item. If each widget costs $30 to produce and ship, enter 30.
3. Enter the Selling Price per Unit. This is what customers pay per item. The price must exceed variable cost, otherwise every unit sold increases losses.
4. Read the break-even output. The calculator shows exactly how many units you must sell to cover all costs, the total revenue required, and the contribution margin each unit generates toward fixed costs and profit.
5. Use the contribution margin ratio to compare product lines. A ratio of 60% means 60 cents of every dollar sold covers fixed costs and profit. Higher ratios mean you break even faster.

Try different pricing scenarios. Raising price by $5 on a product with $30 variable costs and $50,000 fixed costs can cut your break-even point by hundreds of units per month.

Break-even analysis identifies the exact point where total revenue equals total costs, producing zero profit or loss. Understanding this point is essential for pricing decisions, capacity planning, and evaluating whether a business model is viable.

Break-Even Units = Fixed Costs / (Price per Unit - Variable Cost per Unit)

Break-Even Revenue = Break-Even Units × Price per Unit

Contribution Margin = Price per Unit - Variable Cost per Unit

Contribution Margin Ratio = Contribution Margin / Price per Unit

• Fixed Costs are expenses that do not change with volume: rent, insurance, salaries
• Variable Costs scale with each unit produced or sold: materials, packaging, commissions
• Contribution Margin is what remains from each sale after covering variable costs, used to pay fixed costs and generate profit
• Contribution Margin Ratio expresses that margin as a percentage of the selling price

Worked example: A candle business has $50,000 in monthly fixed costs. Each candle costs $30 to make and ships for $75.

Contribution Margin = $75 - $30 = $45 per candle
Break-Even Units   = $50,000 / $45 = 1,112 candles
Break-Even Revenue = 1,112 × $75 = $83,400

Selling more than 1,112 candles per month generates profit. Each candle beyond break-even adds $45 to the bottom line. If the business sells 1,500 candles, profit is (1,500 - 1,112) x $45 = $17,460.

Margin of Safety: Once you know break-even, you can calculate margin of safety as current or projected sales minus break-even sales. A higher margin of safety means more buffer before losses occur, which is critical for businesses with seasonal demand or uncertain markets.