How to use the break-even calculator
- Fixed costs — expenses that do not change with volume: rent, salaries, insurance, loan payments, subscriptions. Pick one period, such as a month, and use it for every input.
- Price per unit — what the customer actually pays you, after any typical discounts.
- Variable cost per unit — costs that rise with every unit sold: materials, packaging, shipping, payment processing and sales commissions.
- Target profit (optional) — the calculator also shows the volume needed to earn that amount.
The break-even formula
Each sale contributes price − variable cost toward fixed costs. That amount is the contribution margin. You break even when total contribution equals fixed costs:
Break-even units = fixed costs ÷ (price − variable cost per unit)
Contribution margin ratio = (price − variable cost) ÷ price
Break-even revenue = fixed costs ÷ contribution margin ratio
Units for a target profit = (fixed costs + target profit) ÷ contribution margin per unit
Worked example
A small screen-printing shop has $12,000 a month in fixed costs. It sells shirts for $25, and each shirt costs $10 in blanks, ink and packaging. The contribution margin is $15 per shirt and the ratio is 60%. Break-even = 12,000 ÷ 15 = 800 shirts, or 12,000 ÷ 0.60 = $20,000 in monthly sales. To clear $3,000 profit on top, the shop needs (12,000 + 3,000) ÷ 15 = 1,000 shirts.
Three levers that move break-even
| Change | Contribution per unit | Break-even units |
|---|---|---|
| Base case | $15.00 | 800 |
| Price up to $27 | $17.00 | 706 |
| Variable cost down to $9 | $16.00 | 750 |
| Fixed costs cut 10% to $10,800 | $15.00 | 720 |
A $2 price increase lowers break-even more than a $1 cut in variable cost or a 10% cut in fixed costs, because the entire increase drops straight into contribution margin — provided customers keep buying at the higher price.
Margin of safety
Compare break-even with the sales you actually expect. Margin of safety = (expected sales − break-even sales) ÷ expected sales. If the shop expects 1,000 shirts a month, its margin of safety is (1,000 − 800) ÷ 1,000 = 20%: sales can fall by a fifth before it starts losing money.
Common mistakes
- Mixing periods — monthly rent alongside annual insurance. Convert everything to the same period first.
- Forgetting per-sale costs such as card fees, marketplace commissions and free shipping, which make the contribution margin look bigger than it is.
- Leaving out the owner's pay. If you need a salary from the business, include it in fixed costs; otherwise "break-even" means working for free.
- Assuming a single product. With several products, use a weighted average price and variable cost based on your sales mix, or analyze each product line separately.
Break-even is a planning estimate: real costs are rarely perfectly fixed or perfectly variable. For pricing individual items, see the profit margin calculator.
Frequently asked questions
What is contribution margin?
It is the price of a unit minus its variable cost — the amount each sale contributes toward fixed costs and, after break-even, toward profit. As a ratio, it is the share of each sales dollar left after variable costs.
Why does the calculator show an error when price is below variable cost?
If each unit costs more to produce than it sells for, every sale adds to the loss. Selling more makes things worse, so there is no break-even point until you raise the price or cut variable costs.
Why is break-even rounded up?
You cannot sell a fraction of a unit. If the exact answer is 416.7 units, selling 416 still leaves a small loss, so 417 is the first whole number that covers fixed costs. The exact figure appears in the note.
Does break-even include income taxes?
No. At break-even there is no profit, so there is no income tax on it. To target an after-tax profit, divide it by (1 − your tax rate) and enter the result as the target profit.
How often should I recalculate break-even?
Whenever prices, supplier costs or fixed expenses change — a new lease, a raise, a price increase. Many owners recheck it at least once a year when they set their budget.
Last updated: October 8, 2026