Break-even calculator
How many units cover your fixed costs, and how many get you to the profit you actually want.
Units to break even
266
each sale contributes 32 toward fixed costs
- Contribution per unit
- $32.00
- Contribution margin
- 65.31%
- Units for 5,000 profit
- 422
| Price per unit | $49.00 |
|---|---|
| Variable cost | -$17.00 |
| Contribution | $32.00 |
| Fixed costs to cover | $8,500.00 |
At $49 a unit against $17 of variable cost, each sale contributes $32, so $8,500 of fixed costs needs 266 units.
How this is calculated
How this is calculated
Contribution, not profit
Each sale contributes price minus variable cost — $32 here — toward fixed costs. Break-even is the point where accumulated contribution equals fixed costs; every unit after that is profit.
units = fixed costs ÷ (price − variable cost)Adding a profit target
A target profit is treated as an additional fixed cost, so the volume needed is (fixed + target) ÷ contribution. Wanting $5,000 of profit here raises the requirement from 266 units to 422.
Worked example: $8,500 of monthly fixed costs, $49 price, $17 variable
| Fixed costs | $8,500 |
|---|---|
| Price | $49 |
| Variable cost | $17 |
| Contribution | $32 per unit |
|---|---|
| Break even | 266 units |
| For $5,000 profit | 422 units |
Raising the price by $5 lifts contribution to $37 and drops break-even to 230 units — a 10% price rise cuts the volume needed by 14%.
What this assumes
- Price and variable cost are the same for every unit.
- Fixed costs do not change with volume.
- Every unit produced is sold.
- Figures exclude sales tax and VAT.
Where this commonly goes wrong
- Costs that scale in steps — a second oven, a third employee — are fixed until they suddenly are not, which moves break-even in a jump rather than a line.
- Payment-processing fees of 1.5–3% are variable costs and are routinely left out, overstating contribution on every sale.
- Discounting cuts contribution far faster than price: a 10% discount on a $49 item with $17 of cost removes 15% of the contribution.
Questions
What is the break-even point?
The sales volume where total contribution exactly covers fixed costs — profit is zero. Below it every unit reduces the loss; above it every unit is profit at the full contribution margin.
What counts as a fixed cost?
Anything you pay regardless of whether you sell one unit or a thousand: rent, salaries, insurance, software, accounting. If the invoice arrives whether or not you traded that month, it is fixed.
Should payment fees be variable?
Yes. A 2.5% processing fee on a $49 sale is $1.23 of variable cost, and it applies to every unit. Leaving it out overstates contribution by roughly 4% and understates the volume you need.
How does raising prices affect break-even?
More than you expect, because the whole increase lands on contribution. Here, $5 on a $49 price raises contribution from $32 to $37 — a 10% price rise cuts the units needed by about 14%.
What about a service business without units?
Use billable hours or engagements as the unit. Price is your rate, variable cost is anything you spend to deliver an hour — contractor time, materials — and fixed costs are everything else.
What is a healthy contribution margin?
It depends entirely on the model: software often runs above 80%, retail 25–40%, food service 60–70% before labour. What matters is whether contribution covers fixed costs at a volume you can realistically sell.
Related tools
Sources
This calculator does arithmetic on the figures you enter. It does not account for tax, fees, or your personal circumstances.
T0