Use this free break-even point calculator to find how many units and how much in sales you need to cover your costs. Enter your fixed costs, the price you sell at and the variable cost of each unit, and the answer shows your break-even units and sales, the contribution margin, a break-even chart with the loss and profit zones, and, if you give them, the units for a profit target, the margin of safety and the profit at the sales you expect. You can also find the break-even price for a number of units, or the break-even sales from your totals when you have no price per unit. It is free and instant, and your numbers stay in your browser.
What is the break-even point?
The break-even point is the number of units you must sell, or the amount of sales you must make, before your income just covers all of your costs. Below it you make a loss, above it a profit. It is one of the first numbers to work out before you start a business, launch a product or change a price. Working it out, and looking at how it changes, is called break-even analysis.
The break-even point formula
Costs come in two kinds. Fixed costs stay the same however much you sell, such as rent, salaries and insurance. Variable costs grow with every unit, such as materials, packaging and shipping. Each sale first pays its own variable cost, and what is left over, called the contribution margin, goes towards the fixed costs.
Break-even units = fixed costs ÷ contribution per unit
Break-even sales = break-even units × selling price
How to calculate the break-even point: an example
A shop has fixed costs of 12,000 a month. It sells an item for 25 and the item costs 10 in materials and shipping.
contribution per unit = 25 − 10 = 15break-even units = 12,000 ÷ 15 = 800break-even sales = 800 × 25 = 20,000Each unit contributes 15 ÷ 25 = 60% of its price. You always round the units up, because you cannot sell part of one: with fixed costs of 5,000 the answer 5,000 ÷ 15 = 333.3 means 334 units.
Break-even point in dollars (sales)
You can also find the break-even sales without a price per unit, which is handy for a business with many products. Divide the fixed costs by the contribution margin ratio, the share of each sale left after variable costs. With sales of 50,000 and variable costs of 20,000 the ratio is 60%, so fixed costs of 12,000 give break-even sales of 12,000 ÷ 0.60 = 20,000. The From Sales Totals tab does this for you.
Break-even with a profit target
To earn a profit, add the profit you want to the fixed costs before you divide. A profit of 3,000 on the example above needs (12,000 + 3,000) ÷ 15 = 1,000 units, which is 25,000 in sales.
Margin of safety
The margin of safety shows how far your expected sales are above the break-even point: (expected units − break-even units) ÷ expected units. At 1,000 units against a break-even of 800, it is 20%, and the profit is 1,000 × 15 − 12,000 = 3,000. If it is negative, you expect to sell less than you need.
How to read a break-even chart
The chart shows units sold along the bottom and money up the side. The green line is revenue, the blue line is your total cost (fixed costs plus variable costs), and the dashed line is your fixed costs. Where the green and blue lines cross is the break-even point. To the left of it the cost line is higher, so you make a loss (red). To the right the revenue line is higher, so you make a profit (green). The table under the calculator lists the same numbers.
Break-even price
If you know how many units you expect to sell, you can work backwards to a price: variable cost per unit + fixed costs ÷ units. For 1,000 units with a variable cost of 10 and fixed costs of 12,000, the break-even price is 10 + 12 = 22. To also earn 3,000, charge 10 + 15 = 25. The Break-Even Price tab does this.
How to lower your break-even point
There are three ways: raise your price, lower your variable cost per unit, or lower your fixed costs. A higher price or a lower variable cost increases the contribution per unit, so fewer units are needed. Cutting fixed costs lowers the target directly. The tables under the calculator show what each change does.
Break-even point in Excel and Google Sheets
If the fixed costs are in A2, the price in B2 and the variable cost in C2, the break-even units are =ROUNDUP(A2/(B2-C2),0) and the break-even sales are that number times B2. For the sales from a contribution margin ratio, use =A2/((B2-C2)/B2).
Break-even and cost-volume-profit analysis
Cost-volume-profit (CVP) analysis looks at how costs, sales volume and profit move together. The break-even point is its starting number, and the profit target, the margin of safety and the chart are the other parts. To work out the margin on a single sale, use the Profit Margin Calculator.
Calculators that go with this one
To turn a cost into a selling price for a margin or markup, use the Profit Margin Calculator. To work out a sale price, use the Discount Calculator, and to add tax to a price use the Sales Tax Calculator or the VAT Calculator.
