Work out how many units you need to sell to cover your fixed costs, and the break-even revenue.
Last updated: October 31, 2026
Fixed costs, variable costs and contribution margin
The break-even point is the number of sales at which total revenue equals total costs: you make neither a profit nor a loss. Every unit sold after that point is profit. Formula: Break-even units = fixed costs ÷ (price per unit − variable cost per unit). The difference in brackets is the contribution margin: how much each sale contributes towards the fixed costs. Example: a business with $10,000 of monthly fixed costs sells a product for $50 that costs $30 to make. The contribution margin is $20, so it breaks even at 10,000 ÷ 20 = 500 units, or $25,000 in sales. • Fixed costs don't change with sales volume: rent, salaries, insurance, software subscriptions. • Variable costs rise with every sale: materials, packaging, shipping, payment fees. There are three ways to lower the break-even point: cut fixed costs, raise the price or lower the variable cost per unit. Use amounts without sales tax.
Common questions about break-even
Divide fixed costs by the contribution margin per unit (price − variable cost). 10,000 ÷ (50 − 30) = 500 units.
Other tools you may find useful
Costs per period, like rent and salaries.
What you sell one unit for.
Materials, shipping etc. for one unit.