Break-Even Calculator
Break-Even Analysis
500.00
Units to Break Even
25,000.00
Break-Even Revenue
20.00
Contribution Margin
What is Break-Even Analysis?
Break-even analysis determines the point at which total revenues equal total costs — the point where a business neither makes a profit nor suffers a loss. Above this point, every additional unit sold generates profit.
It is a fundamental tool for pricing decisions, business planning, and evaluating whether a product or service is viable.
Fixed vs Variable Costs
Fixed costs stay constant regardless of production volume — rent, salaries, insurance, software subscriptions. Variable costs change with each unit produced — materials, shipping, packaging, commissions. The difference between the selling price and variable cost per unit is called the contribution margin — the amount each unit contributes toward covering fixed costs.
Frequently Asked Questions
How do I reduce my break-even point?
You can lower break-even by reducing fixed costs (e.g., cheaper office space, fewer staff), reducing variable costs (e.g., bulk purchasing, better suppliers), or increasing your selling price. Any combination of these shrinks the number of units needed to break even.
What is a contribution margin ratio?
The contribution margin ratio is the contribution margin expressed as a percentage of the selling price. E.g., if the selling price is 50 and variable cost is 30, CM = 20 and CM ratio = 40%. A higher ratio means each sale contributes more toward fixed costs and profit.
What is a safety margin?
The margin of safety is the difference between actual (or expected) sales and the break-even sales level. It shows how much sales can decline before losses occur. A large safety margin indicates a more resilient business.
Can this be used for services (not just products)?
Yes. For service businesses, "variable cost per unit" can represent labor or materials per service delivery. "Selling price" is the fee per service. Fixed costs remain overhead like rent and subscriptions.
Formula
Contribution Margin = Price − Variable Cost