Break Even Calculator

To find your break-even point, divide fixed costs by the contribution margin per unit, which is the price minus the variable cost. With $12,000 of monthly fixed costs, a $40 price and a $15 variable cost, each unit contributes $25, so you break even at 480 units, or $19,200 in sales. The break even calculator below shows every step.

How to use the break-even calculator

1. Choose the period your costs cover: a month, quarter, year or week. Keep every figure in that same period.
2. Pick a tab. Break-even units needs a price and a variable cost per unit. Break-even sales needs only a contribution margin ratio, which suits service businesses. Several products takes a sales mix. Break-even price finds the lowest price for a planned volume.
3. Add a target profit or the sales you expect, if you have them, to see the units needed for that profit and your margin of safety.
4. Open Show steps for the working, then read the chart and the sensitivity table to see what moves the answer.

Break-even point formula

Every cost in a break-even analysis is one of two kinds:

• Fixed costs stay the same whether you sell nothing or a lot during the period: rent, salaries, insurance, software, loan payments.
• Variable costs rise with each unit sold: materials, packaging, shipping, card fees, sales commission.

The contribution margin is what one sale leaves after its own variable cost. It is the money that “contributes” to paying the fixed costs, and once they are covered, to profit.

• Contribution margin per unit = price − variable cost per unit
• Break-even units = fixed costs ÷ contribution margin per unit
• Contribution margin ratio = contribution margin per unit ÷ price
• Break-even sales = fixed costs ÷ contribution margin ratio
• Units for a target profit = (fixed costs + target profit) ÷ contribution margin per unit
• Margin of safety = expected sales − break-even sales, often shown as a percent of expected sales

Because you cannot sell part of a unit, round break-even units up. If the price is not above the variable cost, the contribution margin is zero or negative and no number of sales will ever break even.

Worked examples

Example 1: units, target profit and margin of safety

A small candle maker has $12,000 of fixed costs a month. Each candle sells for $40 and costs $15 in wax, jars and shipping.

• Contribution margin: $40 − $15 = $25 per candle.
• Break-even: $12,000 ÷ $25 = 480 candles a month, or 480 × $40 = $19,200 in sales.
• Ratio check: $25 ÷ $40 = 62.5%, and $12,000 ÷ 0.625 = $19,200.
• For a $5,000 monthly profit: ($12,000 + $5,000) ÷ $25 = 680 candles.
• If the maker expects to sell 600 candles, profit is 600 × $25 − $12,000 = $3,000, and the margin of safety is 600 − 480 = 120 candles, or 120 ÷ 600 = 20% of expected sales.

Example 2: break-even sales for a service business

A consultant has $9,000 of monthly fixed costs. Travel and subcontractors take 40 cents of each dollar billed, so the contribution margin ratio is 60%. Break-even sales are $9,000 ÷ 0.60 = $15,000 a month. To earn $3,000 on top, sales must reach ($9,000 + $3,000) ÷ 0.60 = $20,000.

Example 3: several products with a sales mix

A shop has $30,000 of fixed costs and sells three products in a 6 : 3 : 1 mix: Basic ($20 price, $8 variable cost), Pro ($50, $25) and Deluxe ($90, $37). Their contribution margins are $12, $25 and $53.

• Weighted average contribution margin: (600 × $12 + 300 × $25 + 100 × $53) ÷ 1,000 = $20,000 ÷ 1,000 = $20 per unit.
• Break-even: $30,000 ÷ $20 = 1,500 units, split 900 Basic, 450 Pro and 150 Deluxe.
• Break-even sales: 900 × $20 + 450 × $50 + 150 × $90 = $54,000.

The plain average of the three margins is ($12 + $25 + $53) ÷ 3 = $30, which would suggest only 1,000 units. That is too optimistic, because the low-margin Basic model sells most.

Example 4: the lowest price for a planned volume

If the candle maker can only make 500 candles a month, the break-even price is $15 + $12,000 ÷ 500 = $15 + $24 = $39. Any price above $39 makes a profit at that volume.

How each change moves the break-even point

Starting from Example 1 (break-even at 480 units), here is what one change at a time does. Units are rounded up.

A $5 price change moves break-even more than a $2,000 change in rent here, because it changes the margin on every unit. The calculator’s sensitivity table does this for your own numbers.

Common break-even mistakes

• Mixing periods. Yearly rent with monthly sales gives an answer twelve times too high. Pick one period for everything.
• Forgetting your own pay. If you plan to pay yourself, include that amount in fixed costs, or the break-even point will look easier than it is.
• Leaving out small variable costs. Card processing fees, packaging and returns all shrink the contribution margin.
• Splitting semi-variable costs badly. A phone plan with a base fee and usage charges has both parts. Put the base in fixed costs and the usage in variable costs.
• Using a plain average for several products. Weight each margin by how much of it you sell, as in Example 3.
• Treating the result as exact. It is a planning estimate. The SBA suggests adding about 10% for unexpected expenses; the calculator has a box for that.

Where break-even analysis helps

The U.S. Small Business Administration describes break-even analysis as a way to price products, set sales targets, spot costs you missed, and decide whether an idea is worth pursuing. Lenders and investors usually expect to see it. It also answers everyday questions: is a new hire worth it (how many extra units pay the salary?), can you afford a larger space, or should you drop a slow product? For pricing itself, the markup and margin calculator turns a cost and a target margin into a price.

Sources

Checked November 2026.

• U.S. Small Business Administration: Break-even point (Plan your business)
• U.S. Small Business Administration: Break-even point calculator

Results are estimates for planning, not financial or tax advice.

Break-even point practice quiz: 10 questions

Test yourself with 10 multiple-choice questions. Choose an answer and press Submit to see if you are right and why. Your score appears at the end.

Frequently asked questions

What is the formula for the break-even point?

Break-even units = fixed costs ÷ (price − variable cost per unit). For break-even sales in dollars, divide fixed costs by the contribution margin ratio. With $12,000 of fixed costs and a $25 margin on a $40 price, that is 480 units or $19,200.

How do I calculate break-even if I do not sell units?

Work out what share of each sales dollar is left after variable costs. That share is the contribution margin ratio. Divide your fixed costs by it: $9,000 ÷ 60% = $15,000 of sales.

What is a margin of safety?

It is how far expected sales can fall before you reach break-even. Selling 600 units with a break-even point of 480 gives a margin of safety of 120 units, or 20% of expected sales. A larger margin of safety means more room for a slow month.

How do you find break-even for multiple products?

Weight each product’s contribution margin by its share of units sold to get a weighted average, then divide fixed costs by it. The answer holds only while the sales mix stays the same. The weighted average calculator shows the averaging step on its own.

Is contribution margin the same as gross margin?

No. Contribution margin subtracts only variable costs from sales. Gross margin subtracts the cost of goods sold, which can include fixed production costs such as factory rent. For break-even analysis, use the contribution margin.

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