What this calculator does
Break-even is the point at which sales exactly cover both the fixed costs of running the business and the variable cost of making or sourcing each unit sold, with nothing left over as profit and nothing lost. Selling below that many units means a loss over the period; selling above it means a profit.
The calculation rests on the contribution margin, the amount each unit sold contributes toward fixed costs after its own variable cost is covered. A slim contribution margin means a lot of units need to be sold before fixed costs are cleared; a wide one clears them much sooner.
The formula
Subtract variable cost per unit from price per unit to get the contribution margin per unit, then divide fixed costs by that margin to find the number of units needed to break even. Multiplying that unit figure by the price per unit gives the equivalent break-even revenue.
| Term | Meaning |
|---|---|
| Break-even units | The number of units that must be sold to cover all costs: fixed costs ÷ contribution margin per unit. |
| Contribution margin per unit | The amount each unit sold contributes toward fixed costs: price per unit − variable cost per unit. |
| Fixed costs | Costs that do not change with sales volume over the period, such as rent, salaries or platform fees. |
| Variable cost per unit | Costs that scale directly with each unit sold, such as cost of goods, packaging and payment processing. |
The inputs explained
| Field | What to enter |
|---|---|
| Fixed costs ($) | The total fixed costs for the period being measured, unaffected by how many units are sold. |
| Price per unit ($) | The selling price per unit. |
| Variable cost per unit ($) | The cost that varies directly with each unit sold, such as cost of goods, packaging and per-order fees. |
When to use it
Launching a new product
Working out the break-even point before launch shows how many units need to sell, and gives a concrete sales target against which early performance can be judged.
Assessing a price change
Lowering price reduces the contribution margin per unit and raises the number of units needed to break even, so this calculation shows whether a price cut is likely to be recovered through higher volume.
Deciding whether a fixed cost is affordable
Adding a new fixed cost, such as a subscription tool or extra staff, raises the break-even point; checking the new figure against realistic sales volumes shows whether that cost is sustainable.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How break-even units change with price at a fixed variable cost and fixed costs
A fixed $5,000 in fixed costs and $22 variable cost per unit, across a range of selling prices.
| Price per unit | Break-even units | Break-even revenue |
|---|---|---|
| $26 | 1,250 | $32,500.00 |
| $30 | 625 | $18,750.00 |
| $35 | 385 | $13,461.54 |
| $40 | 278 | $11,111.11 |
| $50 | 179 | $8,928.57 |
| $60 | 132 | $7,894.74 |
How break-even units change with fixed costs at a fixed price and variable cost
A fixed $40 price and $22 variable cost per unit, across a range of fixed cost levels.
| Fixed costs | Break-even units | Break-even revenue |
|---|---|---|
| $2,000 | 111 | $4,444.44 |
| $3,500 | 194 | $7,777.78 |
| $5,000 | 278 | $11,111.11 |
| $7,500 | 417 | $16,666.67 |
| $10,000 | 556 | $22,222.22 |
| $15,000 | 833 | $33,333.33 |
Questions
What happens if price is lower than variable cost per unit?
There is no break-even point in that situation, since every unit sold loses money regardless of volume. Selling more units in that case increases the total loss rather than working toward a profit.
Does this account for shipping and payment processing fees?
Only if they are included in the variable cost per unit entered. Since those costs typically scale with each order, they normally belong alongside cost of goods in the variable cost figure rather than in fixed costs.
How is this different from the marketing break-even ROAS calculation?
Break-even ROAS asks what return an advertising campaign needs to be worthwhile, given a profit margin. This calculator asks how many units a business as a whole needs to sell to cover its fixed and variable costs, which is a broader question that does not depend on advertising at all.
Should break-even be recalculated often?
Whenever price, variable costs or fixed costs change meaningfully. A break-even figure calculated once at launch can drift out of date as supplier costs, rent or staffing change over time.
For the average shipping cost feeding into variable cost per unit, see the shipping cost per unit calculator. To see what a typical order is worth once it clears this break-even point, use the average order value calculator.