Break-even calculator: break-even point, revenue and margin of safety
Enter fixed costs, selling price, variable cost and expected sales to see how much you need to sell to break even and how much room you have above it.
Short answer
Break-even point in units = fixed costs ÷ (selling price − variable cost per unit). Break-even revenue = break-even units × selling price. With 240,000 of fixed costs, a price of 150 and variable cost of 90 per unit, contribution is 60 per unit. You break even at 4,000 units, or 600,000 of revenue.
Break-even calculator
Amounts excluding VAT. If you sell many different products, use an average selling price and average variable cost. Any currency works.
- Contribution per unit
- 60.00
- Break-even revenue
- 600,000
- Margin of safety
- 20.0%
- Profit at expected sales
- 60,000
- Break-even point
- 4,000 units
Break-even formulas
| What you want to know | Formula | Example |
|---|---|---|
| Contribution per unit | selling price − variable cost per unit | 150 − 90 = 60 |
| Break-even point (units) | fixed costs ÷ contribution per unit | 240,000 ÷ 60 = 4,000 units |
| Break-even revenue | fixed costs ÷ contribution margin ratio | 240,000 ÷ 40% = 600,000 |
| Margin of safety | (expected sales − break-even sales) ÷ expected sales | (5,000 − 4,000) ÷ 5,000 = 20% |
| Sales for a profit target | (fixed costs + target profit) ÷ contribution per unit | (240,000 + 60,000) ÷ 60 = 5,000 |
Variable costs rise with every unit sold: purchases, materials, packaging, shipping, payment fees. Fixed costs stay the same within a year whatever you sell: rent, salaries, insurance, software, depreciation. If you are unsure about an item, treat it as fixed. Your break-even point then comes out too high rather than too low.
Break-even for a service business
If you sell hours rather than products, use one hour as the unit. The price is your hourly rate; variable cost is what an extra hour costs you, such as a contractor. Salaries of permanent staff are fixed costs.
A firm with 900,000 of fixed costs a year, salaries included, and an average rate of 100 per hour with no variable cost must bill 9,000 hours to break even. With ten consultants that is 900 hours each. Whether that is realistic shows in the utilization calculator.
Worked example: a product with 60 contribution
A fictional producer sells one product. The calculator above starts with these figures.
| Item | Amount |
|---|---|
| Fixed costs per year | 240,000 |
| Selling price per unit | 150 |
| Variable cost per unit | 90 |
| Contribution per unit | 60 (40%) |
| Break-even point | 4,000 units |
| Break-even revenue | 600,000 |
| Expected sales | 5,000 units |
| Profit at expected sales | 60,000 |
| Margin of safety | 20% |
A price rise of 10 lifts contribution to 70 per unit. The break-even point falls to 3,429 units, and sales can drop to 4,286 units before profit falls below today's. That is how quickly you see what a discount or price rise means.
Where break-even analysis stops
- Several products. With a product mix, use a weighted average contribution. If the mix shifts, so does the break-even point.
- Fixed costs are not always fixed. Above a certain volume you need another machine or person.
- Profit is not cash. Even above break-even, cash can be tight when customers pay late. Check your working capital.
Getting the figures from your accounts
Your accounts do not label costs as fixed or variable. You classify the expense accounts yourself: purchases and materials are usually variable, staff, rent and depreciation fixed. For contribution per product or customer, see the contribution margin calculator. Connect your accounting to DigiData, record the classification once, and the financial dashboard shows every month how far above or below break-even you are.
Frequently asked questions
What is the break-even point?
The point where revenue exactly covers fixed and variable costs: no profit and no loss. Every unit sold above it adds its full contribution to profit.
What is the difference between break-even units and break-even revenue?
Units are the number of items or hours you must sell; revenue is the same point in money. With one product, revenue is units times price. With many products, work in revenue directly: fixed costs divided by the contribution margin ratio.
Do I include VAT or sales tax?
No. VAT is neither revenue nor a cost for a VAT-registered business. Use prices and costs excluding VAT.
How do I work out the sales needed for a profit target?
Add the target profit to fixed costs and divide by contribution per unit. For 60,000 profit in the example that is (240,000 + 60,000) ÷ 60 = 5,000 units.
See every month whether you are above break-even
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