Q3Free Tool
Break-Even Point Calculator
Find out how many units you need to sell, and how much revenue you need, to cover your costs. Enter your fixed costs, variable cost per unit and selling price to get the break-even point, break-even sales and contribution margin, with the formulas shown.
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- · Optional target profit
- · Runs in your browser
Private by design. Calculations run in your browser; the numbers you enter are not sent to Q3 Labs.
Result
Enter the fixed costs, the variable cost per unit and the selling price per unit to see the result.
What is the break-even point?
The break-even point is where total revenue equals total costs. At break-even, profit is exactly zero: there is neither a profit nor a loss. Every unit sold beyond it adds profit; every unit short of it leaves a loss.
A few terms make the calculation clear:
- Fixed costs stay the same however many units you sell in the period: rent, salaries, insurance, software.
- Variable costs rise with each unit sold: materials, packaging, shipping, payment fees, sales commission.
- Total costs are fixed costs plus variable cost per unit × units sold.
- Revenue is selling price × units sold.
- Contribution margin is selling price − variable cost per unit: what each sale contributes toward fixed costs.
- Profit is revenue − total costs. At the break-even point it is zero.
How to calculate break-even units
- Find the contribution margin: selling price − variable cost. ₹100.00 − ₹50.00 = ₹50.00 per unit.
- Divide the fixed costs by it: ₹50,000.00 ÷ ₹50.00 = 1,000.00 units.
- Round up to whole units if the answer has a fraction: here it is exactly 1,000 units.
Break-even formula
Contribution margin per unit = Selling price − Variable cost
Contribution margin ratio = Contribution margin ÷ Selling price × 100
Break-even units = Fixed costs ÷ Contribution margin per unit
Break-even sales = Break-even units × Selling price
Target profit units = (Fixed costs + Target profit) ÷ Contribution margin per unit
- The contribution margin is what's left from each sale after paying for that unit.
- The contribution margin ratio is the share of every sale that goes toward fixed costs and profit.
- Break-even units is how many of those contributions it takes to pay the fixed costs.
- Break-even sales is the revenue those units bring in.
- Target profit units treats the profit you want as one more cost to cover.
Where the formula comes from
Total cost = Fixed costs + (Variable cost × Units)
Total revenue = Selling price × Units
At break-even: Selling price × Units = Fixed costs + Variable cost × Units
(Selling price − Variable cost) × Units = Fixed costs
Units = Fixed costs ÷ (Selling price − Variable cost)
How to calculate break-even sales
Break-even sales is the revenue you need to cover all costs. Multiply the break-even units by the selling price: 1,000.00 × ₹100.00 = ₹1,00,000.00.
You can also get there without counting units, which is useful when you sell many products: divide the fixed costs by the contribution margin ratio. ₹50,000.00 ÷ 50.00% = ₹1,00,000.00.
Contribution margin explained
The contribution margin is the heart of break-even analysis. If a product sells for ₹100.00 and costs ₹60.00 to make and deliver, each sale contributes ₹40.00, a 40.00% contribution margin ratio, toward fixed costs. The bigger the contribution margin, the fewer units you need to break even.
The same fixed costs of ₹50,000.00 and a variable cost of ₹50.00, at different prices:
| Selling price | Contribution margin | Ratio | Break-even point |
|---|---|---|---|
| ₹75.00 | ₹25.00 | 33.33% | 2,000 units |
| ₹90.00 | ₹40.00 | 44.44% | 1,250 units |
| ₹100.00 | ₹50.00 | 50.00% | 1,000 units |
| ₹125.00 | ₹75.00 | 60.00% | 667 units |
| ₹150.00 | ₹100.00 | 66.67% | 500 units |
Break-even examples
Example 1: simple break-even
Fixed costs ₹50,000.00, variable cost ₹50.00 per unit, selling price ₹100.00. Contribution margin ₹50.00, so the break-even point is 1,000 units and break-even sales are ₹1,00,000.00.
Example 2: higher variable cost
Fixed costs ₹1,00,000.00, variable cost ₹60.00, selling price ₹100.00. The contribution margin falls to ₹40.00, so you need 2,500 units and ₹2,50,000.00 in sales to break even.
Example 3: impossible break-even
Variable cost ₹110.00, selling price ₹100.00. The contribution margin is −₹10.00: every sale loses money before fixed costs are counted, so no number of sales at this price can reach break-even.
Example 4: a fractional result
Fixed costs ₹40,010.00, variable cost ₹60.00, selling price ₹100.00. The exact break-even point is 1,000.25 units. Since you can only sell whole units, you need 1,001 units: rounding down would leave a small loss.
Example 5: no fixed costs
With fixed costs of ₹0.00, the break-even point is 0 units. There is nothing to recover, so every sale at ₹100.00 makes ₹50.00 profit.
What happens when variable costs exceed selling price?
If the variable cost per unit is higher than the selling price, the contribution margin is negative. Each extra sale adds to the loss, so selling more makes things worse, not better. The formula would produce a negative number of units, which has no business meaning, so the calculator reports that break-even cannot be reached instead.
If the selling price exactly equals the variable cost, the contribution margin is zero: each sale pays for itself but nothing toward fixed costs. Break-even is again out of reach. The fix in both cases is to raise the price, cut the variable cost, or both.
Break-even point vs profit
Break-even and profit margin solve different problems:
Break-even
"How much do I need to sell before profit becomes zero or positive?"
Profit margin
"How much of my revenue is profit?"
Once you know you can pass break-even, the Profit Margin Calculator shows how profitable the sales above it are, and the Markup Calculator helps you set a selling price from your costs.
How target profit changes break-even units
Breaking even only means you aren't losing money. To plan for a profit, add it to the fixed costs: the units you need are (Fixed costs + Target profit) ÷ Contribution margin.
With fixed costs of ₹50,000.00, a target profit of ₹25,000.00 and a contribution margin of ₹50.00: (₹50,000.00 + ₹25,000.00) ÷ ₹50.00 = 1,500 units, or ₹1,50,000.00 in sales, compared with 1,000 units to break even.
Assumptions and limits
This is a simple break-even model, not a full financial forecast. It assumes that:
- fixed costs stay fixed over the range of sales you are considering;
- the variable cost per unit is constant;
- the selling price per unit is constant; and
- every unit is sold at the stated price.
Real businesses often have tiered or discounted pricing, several products with different margins, costs that change with volume, taxes, commissions, refunds and capacity limits. Use the result as a starting point and adjust your inputs, or model each scenario separately, to reflect them.
Common break-even calculation mistakes
- Dividing by the price instead of the contribution margin. ₹50,000.00 ÷ ₹100.00 gives 500 units, half the real answer.
- Leaving out variable costs. Payment fees, shipping, packaging and commission all reduce the contribution margin.
- Mixing time periods. Use monthly fixed costs for a monthly break-even point, yearly for yearly.
- Rounding units down. 1,000.25 units means you need 1,001 units, not 1,000.
- Including sales tax in the price. Tax you collect for the government isn't revenue that covers your costs.
- Treating break-even as a goal. It is the minimum; set a target profit to plan for a sustainable business.
Frequently Asked Questions
What is the break-even point?
What is the break-even formula?
How do I calculate break-even units?
How do I calculate break-even sales?
What is contribution margin?
What if the variable cost is higher than the selling price?
Why does the calculator round break-even units up?
What does a break-even point of 0 units mean?
How do I find the units needed for a target profit?
What is the difference between break-even and profit margin?
Are fixed costs the same as overheads?
Does this calculator include taxes and fees?
Does the currency selector convert currencies?
Are my numbers saved or sent anywhere?
Explore more
Check how profitable your sales are with the Profit Margin Calculator, set a price from your costs with the Markup Calculator, work out a sale price with the Percent Off Calculator, or find a value before a change with the Reverse Percentage Calculator. Browse all our free tools.
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