How it works
Every unit sold covers its own variable cost first, and whatever's left — the contribution margin — goes toward paying off the fixed costs that don't change with volume. Break-even is the point where enough units have been sold that the accumulated contribution margin exactly equals the fixed costs, so profit is zero.
contribution margin per unit = price − variable cost per unit
break-even units = fixed costs ÷ contribution margin per unit
break-even revenue = break-even units × price
Worked example
$10,000 fixed costs, $15 variable cost per unit, $40 price per unit.
- Contribution margin: $40 − $15 = $25 per unit.
- Break-even units: $10,000 ÷ $25 = 400 units.
- Break-even revenue: 400 × $40 = $16,000.
Selling 400 units for $16,000 in revenue exactly covers both the $10,000 fixed costs and the $6,000 of variable costs on those units — the 401st unit is the first to generate actual profit.
Common questions
What counts as a fixed cost versus a variable cost?
Fixed costs stay the same regardless of how many units you sell — rent, salaries, insurance. Variable costs scale with each unit — materials, packaging, per-unit shipping. Getting this split right matters, because a cost misclassified as fixed when it's actually variable will throw off the break-even point.
What if price is lower than the variable cost?
Then there's no break-even point at all — every unit sold loses money before fixed costs are even considered, so no volume of sales can dig out of that hole. This calculator flags that case rather than showing a meaningless negative unit count.