Break-even calculator
Enter your fixed costs, the selling price and the variable cost per unit to see how many units and how much revenue you need to break even, together with the contribution margin and contribution margin ratio. Add a target profit to see the sales it takes to earn it.
How it is calculated
Break-even point formula
The break-even point is where total revenue equals total cost – no profit, no loss. The U.S. Small Business Administration gives the formula:
Break-even point (units) = fixed costs ÷ (sales price per unit − variable cost per unit)
The denominator is the contribution margin per unit: the amount each sale contributes toward covering fixed costs.
Example
The OpenStax accounting textbook uses a birdbath maker with $18,000 fixed costs, a $100 price and $20 variable cost per unit:
| Figure | Calculation | Result |
|---|---|---|
| Contribution margin per unit | $100 − $20 | $80 |
| Contribution margin ratio | 80 ÷ 100 | 80% |
| Break-even units | 18,000 ÷ 80 | 225 units |
| Break-even sales | 18,000 ÷ 0.80 | $22,500 |
When the result is not a whole number, the calculator rounds up: with $5,000 fixed costs, a $25 price and $10 variable cost you need 5,000 ÷ 15 = 333.33, so 334 units.
Break-even in sales dollars
Break-even sales = fixed costs ÷ contribution margin ratio, where the ratio is contribution margin ÷ price. This is handy when you sell many products at different prices: with an average ratio you get the revenue you need without counting units, as long as your sales mix stays the same.
Adding a target profit
Treat the profit you want like an extra fixed cost: units = (fixed costs + target profit) ÷ contribution margin per unit. In the OpenStax example a $16,000 profit takes (18,000 + 16,000) ÷ 80 = 425 units, or $42,500 in sales.
Keep in mind
Use prices before sales tax, and keep all figures on the same period – monthly fixed costs give a monthly break-even. The model assumes costs rise in a straight line; volume discounts or a step up in fixed costs (a second location, a new hire) move the break-even point.
Frequently asked questions
How do you calculate the break-even point?
Divide fixed costs by the contribution margin per unit (price − variable cost). $18,000 ÷ ($100 − $20) = 225 units.
How do I calculate break-even sales in dollars?
Divide fixed costs by the contribution margin ratio: $18,000 ÷ 80% = $22,500. The ratio is the contribution margin divided by the price.
What is the contribution margin?
The selling price minus the variable cost per unit. It is what each sale contributes toward fixed costs and, once they are covered, toward profit.
How many units do I need to sell to make a target profit?
Add the target profit to fixed costs and divide by the contribution margin per unit: (18,000 + 16,000) ÷ 80 = 425 units.
What is the break-even formula in Excel?
Fixed costs in A2, price in B2, variable cost in C2: units =ROUNDUP(A2/(B2-C2),0), sales =A2/((B2-C2)/B2).
Sources and legal basis
- U.S. Small Business Administration – Break-even point (Calculate your startup costs)
- OpenStax Principles of Accounting, Vol. 2, 3.2 Calculate a Break-Even Point in Units and Dollars (Rice University)
- OpenStax Principles of Accounting, Vol. 2, 3.1 Contribution Margin (Rice University)
As of:
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