Break Even Calculator
Calculate exactly how many units you need to sell to cover all costs — with profit projections at multiple sales levels and a target profit calculator.
How to Use the Break Even Calculator
- 1Enter your total fixed costs — all expenses that remain constant regardless of how much you produce or sell such as rent salaries and equipment costs.
- 2Enter your variable cost per unit — the cost to produce or deliver each individual unit including materials and direct labor — and your selling price per unit.
- 3Enter an optional target profit amount to see how many units you need to sell to achieve that profit level beyond break even.
- 4Download the free PDF with a complete profit projection table showing your profit or loss at multiple sales volumes.
Example Calculation
Fixed Costs: $50,000 | Variable Cost: $15/unit | Price: $45/unit | Target Profit: $20,000
- Contribution Margin: $30/unit (66.67%)
- Break Even Units: 1,667
- Break Even Revenue: $75,015
- Units for $20,000 profit: 2,334
- Revenue for target profit: $105,030
Profit Table:
1000 units: Revenue $45,000 | Costs $65,000 | Loss -$20,000
1500 units: Revenue $67,500 | Costs $72,500 | Loss -$5,000
1667 units (BEP): Revenue $75,015 | Costs $75,005 | Profit $10
2000 units: Revenue $90,000 | Costs $80,000 | Profit $10,000
2334 units (target): Revenue $105,030 | Costs $84,010 | Profit $21,020
2500 units: Revenue $112,500 | Costs $87,500 | Profit $25,000
Frequently Asked Questions
What is the break even point?
The break even point is the level of sales at which total revenue equals total costs resulting in zero profit or loss. Below the break even point the business operates at a loss. Above it the business generates profit. Knowing your break even point is essential for pricing decisions production planning and evaluating the viability of a business or product.
What is contribution margin?
Contribution margin is the selling price minus the variable cost per unit. It represents how much each unit sold contributes toward covering fixed costs and generating profit. For example if a product sells for $45 and costs $15 to produce the contribution margin is $30. You need to sell enough units to accumulate enough contribution margin to cover all fixed costs. Once fixed costs are covered every additional unit sold generates pure profit at the contribution margin rate.
What is the difference between fixed and variable costs?
Fixed costs remain constant regardless of production volume. Examples include rent insurance salaried employee wages and equipment payments. Variable costs change directly with production volume. Examples include raw materials direct labor costs packaging and shipping. Understanding this distinction is critical for break even analysis because only fixed costs determine your break even point while variable costs affect your contribution margin.
How can I lower my break even point?
You can lower your break even point in three ways. First increase your selling price which raises the contribution margin per unit. Second reduce variable costs through better supplier negotiations or more efficient production. Third reduce fixed costs by finding cheaper premises renegotiating contracts or reducing overhead. Each of these strategies allows you to reach profitability with fewer units sold.
How is break even analysis used in business?
Break even analysis is used to evaluate new products set minimum pricing assess the impact of cost changes and determine the sales volume needed to justify a new investment. Investors use it to evaluate business viability. Managers use it for go or no-go decisions on new initiatives. It is also used to compare the profitability of different pricing strategies and cost structures.