How it works
Your contribution margin per unit is the selling price minus the variable cost. Dividing fixed costs by that contribution shows the approximate units needed to break even.
A worked example
If fixed costs are 10,000 per month, selling price is 50, and variable cost is 30 per unit, contribution is 20. You need 500 sales to cover fixed costs, equivalent to revenue of 25,000.
Before you use the result
Assumes constant selling price and variable cost per unit, one sales mix, and fixed overhead for the period. Whole-unit sales are rounded up. Capacity limits, demand, stepped costs, and tax are not modeled.
Keep inputs on a consistent basis. Use the same currency and time period, and check whether your amounts include tax. Calculations use full precision internally; displayed monetary values are rounded to two decimals.
Questions, answered.
What is a break-even point?
It is the sales level where total revenue equals total costs, producing neither a profit nor a loss.
What counts as a fixed cost?
Fixed costs usually include rent, salaries, subscriptions, insurance, and costs that do not change directly with sales volume.
What if price does not cover variable cost?
There is no finite break-even volume under this model when the selling price does not exceed variable cost. Increase price or reduce variable cost.
Calculation methods: read our methodology. Found a problem? Send a correction.