How to use this calculator
- Enter your fixed costs for a period, usually a month or a year.
- Enter your price per unit and variable cost per unit. A “unit” can be a product, a meal, a billable hour or a subscription month.
- Switch to Target profit to see how many units it takes to earn a set profit in the same period.
- Optionally add expected unit sales under Margin of safety to see how much room you have.
You get the break-even point in units and in sales dollars, your contribution margin and ratio, a chart of revenue against total cost, and a table of profit or loss at different sales volumes.
The formulas
Each unit you sell leaves a contribution margin to pay for fixed costs, and after those, profit:
In sales dollars, divide by the contribution margin ratio (contribution margin ÷ price) instead. For a profit target, add the target to the fixed costs:
Worked example
A small online shop has $20,000 of fixed costs a month (rent, two salaries, software and insurance). It sells a product for $45 that costs $25 to make, pack and ship.
- Contribution margin: $45 − $25 = $20 a unit, a ratio of $20 ÷ $45 = 44.44%.
- Break-even: $20,000 ÷ $20 = 1,000 units a month, or $45,000 in sales.
- Target profit: to earn $10,000 a month, it needs ($20,000 + $10,000) ÷ $20 = 1,500 units, or $67,500 in sales.
- Margin of safety: if it expects to sell 1,300 units, it makes $6,000, and sales could fall 300 units (23.1%) before it hits break-even.
On the chart, the revenue line starts at zero and rises $45 per unit; the total-cost line starts at $20,000 and rises $25 per unit. They cross at 1,000 units. Left of that point you lose money; right of it, every unit adds $20 of profit.
What moves the break-even point
Starting from the example above, change one thing at a time:
| Change | Contribution margin | Break-even units | Break-even sales |
|---|---|---|---|
| As above ($45 price, $25 cost, $20,000 fixed) | $20 | 1,000 | $45,000 |
| Price $40 | $15 | 1,334 | $53,333 |
| Price $50 | $25 | 800 | $40,000 |
| Price $55 | $30 | 667 | $36,667 |
| Variable cost $20 | $25 | 800 | $36,000 |
| Variable cost $30 | $15 | 1,334 | $60,000 |
| Fixed costs $15,000 | $20 | 750 | $33,750 |
| Fixed costs $25,000 | $20 | 1,250 | $56,250 |
Price has the most leverage. An 11% price increase, from $45 to $50, lifts the margin by 25% and cuts the break-even point by 20%. A $5 price cut does the reverse and then some: you’d need a third more sales. Before discounting, check the effect here and in the margin calculator; to set a price from a target markup, use the markup calculator.
A service example
A coffee cart with $12,000 of monthly fixed costs sells drinks for $5.50 that cost $1.75 in coffee, milk, cups and card fees. The contribution margin is $3.75 (68.18%), so it breaks even at 3,200 drinks a month, $17,600 in sales. Over 30 days, that’s about 107 drinks a day. Thinking in daily numbers like this makes a target feel concrete.
Tips for using break-even
- Use the same period everywhere. Monthly fixed costs give monthly break-even units; annual costs give annual units.
- Include your owner’s pay in fixed costs if you need the business to pay you. Otherwise “break-even” means working for free.
- Count loan payments as fixed costs. If you’re planning to borrow, the SBA loan calculator or business loan calculator gives the payment to add.
- Services work too. For a consultant, the unit is a billable hour; the hourly rate calculator helps set the price side.
- Judge investments by payback, not just break-even. Once you know the profit an investment adds, the ROI calculator turns it into a return you can compare.
Assumptions and limitations
This is classic cost-volume-profit analysis: price and variable cost per unit stay the same at every volume, and fixed costs don’t change within the period. In practice, volume discounts, overtime, a second location or a price promotion change those lines. If you sell several products, use a weighted average price and variable cost based on your sales mix, or calculate each product line separately. Taxes are not included; break-even is where pre-tax profit is zero.
Sources
- U.S. Small Business Administration: Plan your business, calculate your startup costs (break-even point)
- OpenStax, Principles of Accounting, Volume 2: Managerial Accounting, 3.2 Calculate a Break-Even Point in Units and Dollars
- OpenStax, 3.3 Perform Break-Even Sensitivity Analysis for a Single Product Under Changing Business Situations
These are planning estimates. Real costs and sales rarely follow straight lines, so revisit your numbers as you learn more.
Frequently asked questions
How do you calculate the break-even point?
Divide your fixed costs by the contribution margin per unit, which is the price minus the variable cost. With $20,000 of monthly fixed costs, a $45 price and a $25 variable cost, each sale contributes $20, so you break even at 1,000 units a month.
How do I find break-even in dollars instead of units?
Divide fixed costs by the contribution margin ratio, the share of each sales dollar left after variable costs. In the example, $20 of every $45 sale is margin, a 44.44% ratio, so break-even revenue is $20,000 ÷ 0.4444 = $45,000. It's the same as break-even units times the price.
What's the difference between fixed and variable costs?
Fixed costs stay the same whatever you sell in the period, such as rent, salaries, insurance, software and loan payments. Variable costs rise with each unit sold, such as materials, packaging, shipping, card processing fees and sales commissions. Some costs are a mix; split them as best you can.
How many units do I need to sell to make a profit target?
Add the profit you want to your fixed costs and divide by the contribution margin. To earn $10,000 a month in the example, you need ($20,000 + $10,000) ÷ $20 = 1,500 units, or $67,500 in sales.
What is the margin of safety?
It's how far sales can fall before you start losing money. If you expect to sell 1,300 units and break even at 1,000, your margin of safety is 300 units, or 23.1% of expected sales. A bigger cushion means a downturn is less likely to push you into a loss.
Why does my break-even point come out as a fraction?
Because fixed costs rarely divide evenly by the margin. You can't sell part of a unit, so round up. At a $40 price, $20,000 ÷ $15 = 1,333.3 units, which means you need to sell 1,334 to cover all your costs.
Updated November 2026. Results are estimates for educational purposes and depend on the inputs you provide.