Break-Even Point Calculator
The Point Where a Business Stops Losing Money
Below a certain sales volume, every business is losing money — fixed costs like rent and salaries keep accruing whether or not a single unit sells. Above that volume, each additional sale starts contributing to profit. The break-even point pinpoints exactly where that line sits, in units and in revenue, and it's one of the first calculations any new product launch or pricing decision should run through.
The Formula
Break-Even Point (units) = Fixed Costs / (Price − Variable Cost)
Price minus variable cost is the contribution margin per unit — the amount each sale contributes toward covering fixed costs before it starts generating profit.
A Worked Example
| Item | Amount |
|---|---|
| Fixed Costs | $120,000 |
| Price per Unit | $45 |
| Variable Cost per Unit | $25 |
| Contribution Margin | $20 |
| Break-Even Point | 6,000 units |
| Break-Even Revenue | $270,000 |
Where This Calculation Matters
- New product launches — before committing to a product line, break-even analysis shows whether the required sales volume is realistic given market size and competition.
- Pricing decisions — raising the price per unit lowers the break-even volume needed, which is why break-even analysis is often run alongside price sensitivity testing.
- Cost structure evaluation — comparing break-even points before and after a fixed-cost change (new lease, added staff) quantifies exactly how much extra sales volume that decision requires.
- Investor and lender conversations — break-even point is a standard figure in business plans because it translates abstract financials into a concrete, checkable sales target.
How to Use This Calculator
- Enter Fixed Costs for the period.
- Enter Price per Unit.
- Enter Variable Cost per Unit.
- Select Calculate to see the break-even point in units and the corresponding break-even revenue.
Related Calculations
Check the expense side of the equation with the Cost of Goods Sold Calculator, or verify your books stay in balance with the Double Entry Balance Calculator.