Break-Even Calculator

Fixed costs, variable costs, and contribution

Break-even analysis estimates how many units you must sell before revenue covers costs. Fixed costs stay the same in the short run (rent, salaried staff, tooling). Variable cost per unit rises with each sale (materials, shipping per item). Selling price per unit minus variable cost per unit is the contribution margin — what each sale contributes toward fixed costs and then profit.

Formulas

• Contribution margin = price − variable cost (per unit)
• Break-even units = fixed costs ÷ contribution margin
• Break-even revenue = break-even units × price
• Profit at volume Q ≈ Q × contribution margin − fixed costs

Worked example

Fixed costs £5,000, price £50, variable cost £30 → margin = £20. Break-even units = 5,000 ÷ 20 = 250 units. Break-even revenue = 250 × 50 = £12,500. At 300 units, estimated profit ≈ 300×20 − 5,000 = £1,000.

When the model is useful

Use it for a first-pass sense of volume targets, price changes, or how a cost cut moves the break-even point. It assumes linear costs, one product (or an average product), and that all units produced are sold at the same price.

Common mistakes

• Omitting owner salary or software fees from fixed costs.
• Using selling price below variable cost (negative margin — you lose money on every sale).
• Ignoring tax, returns, or volume discounts.

FAQs

What if I sell multiple products?

Use a weighted-average margin or run the calculator per product line with allocated fixed costs.

Is break-even the same as cash-flow break-even?

Not always — accounting costs and cash timing can differ (loan principal, inventory purchases).

Related: Loan, Interest, Unit Price.