Break-Even Calculator
Find your break-even point
= $10,000 ÷ ($50 - $25)
= $10,000 ÷ $25.00
= 400 units
Sensitivity Analysis: Price Changes
| Price Change | New Price | Break-Even Units | Break-Even Revenue |
|---|---|---|---|
| -20% | $40.00 | 667 | $26,680 |
| -10% | $45.00 | 500 | $22,500 |
| -5% | $47.50 | 445 | $21,137.5 |
| 0% | $50.00 | 400 | $20,000 |
| +5% | $52.50 | 364 | $19,110 |
| +10% | $55.00 | 334 | $18,370 |
| +20% | $60.00 | 286 | $17,160 |
Understanding Break-Even Analysis
How to Use the Break-Even Calculator
The break-even calculator helps entrepreneurs, business owners, and financial analysts determine exactly how many units they need to sell (or revenue they need to generate) to cover all costs. Understanding your break-even point is essential for pricing decisions, investment analysis, and business planning.
Understanding Break-Even Analysis
The break-even point is where total revenue equals total costs—no profit, no loss. The formula is: Break-Even Units = Fixed Costs / (Price per Unit - Variable Cost per Unit). The denominator (Price - Variable Cost) is called the contribution margin per unit.
Fixed vs. Variable Costs
- Fixed Costs: Rent, salaries, insurance, equipment leases—costs that don't change with sales volume
- Variable Costs: Materials, packaging, shipping, sales commissions—costs that increase with each unit sold
Accurately categorizing your costs is crucial for meaningful break-even analysis.
Contribution Margin
The contribution margin shows how much each sale contributes toward covering fixed costs. A higher contribution margin means you reach break-even faster. Calculate your margins precisely with our margin calculator.
Using Break-Even for Decision Making
Break-even analysis helps answer questions like: Can we afford to lower prices? What happens if rent increases? Should we invest in automation to reduce variable costs? The visual chart shows how changes affect your break-even point.
Limitations of Break-Even Analysis
This model assumes linear relationships and doesn't account for economies of scale, stepped costs, or market limitations. Use it as a starting point, not the final word on business viability.
Related Calculators
Set profitable prices with our markup calculator and margin calculator. Analyze investment returns with the ROI calculator.
Frequently Asked Questions
The break-even point is where total revenue equals total costs—you are not making a profit or loss. Every sale above this point generates profit. It is calculated as: Fixed Costs / (Price - Variable Cost per Unit).
Fixed costs stay the same regardless of sales volume (rent, insurance, salaries). Variable costs change with each unit sold (materials, shipping, commissions). Identifying which costs are which is crucial for accurate analysis.
Contribution margin is selling price minus variable cost per unit. It represents how much each sale "contributes" toward covering fixed costs. Higher contribution margin = faster path to break-even and profitability.
Break-even revenue = Fixed Costs / Contribution Margin Ratio. Contribution Margin Ratio = (Price - Variable Cost) / Price. If your ratio is 40%, you need $100,000 revenue to cover $40,000 in fixed costs.
Break-even assumes linear relationships and ignores economies of scale, stepped costs (hiring), market demand limits, time value of money, and opportunity costs. Use it as a starting point, not final analysis.
Lower fixed costs (negotiate rent, reduce overhead), increase prices (if market allows), or reduce variable costs (better supplier terms, efficiency). The chart shows how each change affects break-even.
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