How do I find my break-even point?
- 1Enter your fixed costs for one period, such as a month.
- 2Enter the selling price and the variable cost of one unit.
- 3Optionally add a target profit and the number of units you expect to sell.
- 4Read the break-even units and sales, the contribution margin, the units for your target and your margin of safety.
What is the break-even point formula?
- 01Contribution margin per unit = price − variable cost
- 02Contribution margin ratio = contribution ÷ price
- 03Break-even units = fixed costs ÷ contribution per unit
- 04Break-even sales = fixed costs ÷ contribution margin ratio
- 05Units for a target profit = (fixed costs + target profit) ÷ contribution per unit
- 06Margin of safety = (expected units − break-even units) ÷ expected units
Each unit you sell brings in its price but also costs its variable cost. What's left — the contribution margin — goes first to pay your fixed costs. Once enough units have paid all fixed costs, you have reached the break-even point and every further unit adds its contribution as profit.
Example: fixed costs of 50,000 a month, a price of 500 and a variable cost of 300. Each unit contributes 200, so you need 50,000 ÷ 200 = 250 units, or 125,000 of sales, to break even. To make 20,000 profit you need (50,000 + 20,000) ÷ 200 = 350 units.
The margin of safety shows how much room you have. If you expect to sell 400 units, sales could fall by 150 units — 37.5% — before you make a loss.
This is the standard cost-volume-profit (CVP) model. It assumes the price and the variable cost per unit stay the same at every volume and that every unit made is sold.
How many units do I need to sell to break even?
Fixed costs of 50,000 a month, a price of 500 and a variable cost of 300 per unit:
each unit contributes 200 (40% of the price), so you break even at 250 units — 125,000 of sales.
For a profit of 20,000 you need 350 units. Selling 400 units makes 30,000, with a margin of safety of 37.5%.
Good to know
- Raising the price a little often moves the break-even point more than cutting fixed costs — but check what customers will pay.
- Count all variable costs per unit: packing, delivery, card or platform fees and sales commission.
- Work per month to see how many sales a day you need: break-even units ÷ working days.
- A margin of safety below 10–20% leaves little room for a slow month.
Break-even questions
How do you calculate the break-even point?
Divide your fixed costs by the contribution margin per unit (price − variable cost). With fixed costs of 30,000, a price of 150 and a variable cost of 90, you need 30,000 ÷ 60 = 500 units.
What is the break-even point in sales?
Fixed costs ÷ contribution margin ratio. If 40% of every sale is contribution, fixed costs of 50,000 need 50,000 ÷ 0.40 = 125,000 of sales.
What is the contribution margin?
The selling price minus the variable cost of one unit. It is the part of each sale that pays the fixed costs and, after break-even, becomes profit.
What is the margin of safety?
How much your expected sales are above the break-even point: (expected − break-even) ÷ expected. A 25% margin of safety means sales could fall by a quarter before you lose money.
What are fixed and variable costs?
Fixed costs stay the same however much you sell — rent, staff salaries, internet. Variable costs rise with every unit — materials, packing, delivery. Some costs are partly both; split them as well as you can.
Sources
- OpenStax – Principles of Accounting, Volume 2: Managerial Accounting, break-even (cost-volume-profit) analysis
- U.S. Small Business Administration – Calculate your startup costs and break-even point
Formulas last reviewed: September 30, 2026 ·How we check our formulas