How to use this calculator
Enter your total monthly fixed costs (rent, salaries, insurance, and other expenses that do not change with volume). Then enter your variable cost per unit (materials, direct labor, packaging) and your selling price per unit.
The calculator instantly shows how many units you must sell each month to break even, the total revenue needed, and your contribution margin per unit and ratio.
Understanding break-even analysis
Break-even analysis is one of the most fundamental tools in business planning. It answers a simple but critical question: how much do I need to sell before I start making money?
The key concept is contribution margin, which is the difference between your selling price and variable cost per unit. Each unit you sell “contributes” this amount toward paying off your fixed costs. Once fixed costs are fully covered, every additional contribution margin dollar is profit.
The contribution margin ratio tells you what percentage of each revenue dollar goes toward covering fixed costs. A 60% ratio means that for every $1 in sales, $0.60 goes toward fixed costs and profit while $0.40 covers variable costs.
Frequently asked questions
What is a break-even point?
The break-even point is where total revenue equals total costs. At this point you have zero profit and zero loss. Every unit sold beyond break-even generates profit equal to the contribution margin per unit.
How do I calculate break-even units?
Divide your total fixed costs by the contribution margin per unit (selling price minus variable cost). For example, $10,000 in fixed costs with a $20 contribution margin means you need to sell 500 units to break even.
What is contribution margin?
Contribution margin is the selling price minus variable cost per unit. It represents how much each sale contributes toward covering fixed costs. The contribution margin ratio expresses this as a percentage of the selling price.
What counts as a fixed cost vs a variable cost?
Fixed costs remain constant regardless of production volume: rent, insurance, salaries, loan payments, and software subscriptions. Variable costs change with each unit: raw materials, direct labor, packaging, shipping, and commissions.
How can I lower my break-even point?
Three ways: reduce fixed costs (negotiate rent, cut unnecessary expenses), reduce variable costs (bulk purchasing, more efficient production), or increase your selling price. Any combination reduces the units needed to cover costs.