Enter your fixed costs for the period, your selling price per unit and the variable cost per unit. The calculator returns the contribution margin, the number of units you must sell to break even, and the revenue that represents. It is the fastest sanity check on any price change or new product.
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Contribution margin does the work
Break-even analysis rests on one figure: the contribution margin, which is the selling price minus the variable cost per unit. That is what each sale contributes towards fixed costs. Divide fixed costs by the contribution margin and you have the number of units that gets you to zero. If the contribution margin is negative, no volume will ever save the product.
- Contribution margin = price - variable cost per unit
- Break-even units = fixed costs / contribution margin
- A negative contribution margin cannot be fixed by selling more
Separating fixed from variable
Getting the split right matters more than the arithmetic. Fixed costs stay broadly the same whatever you sell: rent, salaries, software, insurance. Variable costs scale with each unit: materials, packaging, delivery, payment fees, commission. Semi-variable costs like utilities usually need splitting between the two.
- Fixed: rent, salaries, software subscriptions, insurance
- Variable: materials, packaging, delivery, payment fees, commission
- Split semi-variable costs rather than dropping them in one bucket
What discounting does to break-even
A discount comes straight out of the contribution margin, so it moves break-even more than most people expect. At a price of 1500 and variable cost of 900, the contribution is 600. A 10% discount cuts the price by 150, taking contribution to 450, which raises the break-even volume by a third. Running that calculation before approving a discount is the whole point of having it.
- Discounts hit contribution margin, not revenue, proportionally
- Recalculate break-even before approving volume discounts
- Check the required volume uplift is actually achievable
How to calculate the break-even point
Find the sales volume at which total revenue covers total costs.
- Total your fixed costs Add the costs for the period that do not change with sales volume.
- Enter the selling price per unit Use the realistic achieved price after typical discounts.
- Enter the variable cost per unit Include materials, packaging, delivery, payment fees and commission.
- Read the break-even volume The calculator shows the units and the revenue required to break even.
FAQs
How do you calculate the break-even point?
Divide total fixed costs by the contribution margin per unit, where contribution margin is the selling price minus the variable cost per unit. The result is how many units you must sell to cover all costs.
What is contribution margin?
The amount each sale contributes towards fixed costs after its own variable costs are covered: selling price minus variable cost per unit. If it is negative, the product loses money on every sale regardless of volume.
Should I include my own salary in fixed costs?
Yes, if you draw one. Leaving owner compensation out produces a break-even point that looks achievable but does not actually pay anyone, which is one of the most common errors in small-business planning.
How does a price change affect break-even?
Directly and more than people expect, because the change lands entirely on the contribution margin. Cutting a 1500 price by 10% with a 900 variable cost drops contribution from 600 to 450 and raises the break-even volume by roughly a third.
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