Break Even Point Calculator
Solve break even point problems step-by-step with our free calculator. See formulas, worked examples, and clear explanations.
Reviewed by Sahil, Senior Finance & Tax Editor
Formula
Break-Even Units = Fixed Costs / (Price per Unit - Variable Cost per Unit)
The break-even quantity equals total fixed costs divided by the contribution margin (price minus variable cost per unit). Break-even revenue = break-even units multiplied by the price. The contribution margin ratio shows what percentage of each dollar of revenue covers fixed costs and profit.
Worked Examples
Example 1: Coffee Shop Break-Even
Problem:A coffee shop has $8,000/month fixed costs (rent, salaries). Each coffee costs $1.50 in ingredients (variable cost) and sells for $5. How many coffees must they sell to break even?
Solution:Contribution margin: $5.00 - $1.50 = $3.50\nBreak-even units: $8,000 / $3.50 = 2,286 coffees\nBreak-even revenue: 2,286 × $5 = $11,430\nThat is about 76 coffees per day (30-day month).
Result:2,286 coffees/month | $11,430 revenue to break even
Example 2: SaaS Product Launch
Problem:Monthly fixed costs: $25,000 (infrastructure, team). Variable cost per user: $3/month. Subscription price: $29/month.
Solution:Contribution margin: $29 - $3 = $26\nBreak-even subscribers: $25,000 / $26 = 962\nBreak-even MRR: 962 × $29 = $27,898\nContribution margin ratio: $26/$29 = 89.7%
Result:962 subscribers needed | $27,898 MRR to break even
Frequently Asked Questions
What is the break-even point?
The break-even point is the number of units you need to sell (or the revenue you need to generate) to cover all your costs — both fixed and variable. At break-even, total revenue equals total costs, and profit is zero. Selling above break-even generates profit; below it, you incur losses. It is a fundamental concept in business planning, pricing strategy, and financial analysis.
What's the difference between the break-even point in units versus the break-even point in revenue dollars?
Break-even in units is the number of individual items that must be sold for total revenue to equal total costs, calculated as fixed costs ÷ contribution margin per unit. Break-even in revenue dollars converts that same point into a total sales figure, calculated as fixed costs ÷ contribution margin ratio — useful for businesses selling multiple products at different prices where a single 'units' figure isn't meaningful.
What is contribution margin and why is it the key number in a break-even calculation?
Contribution margin is the amount each unit sold contributes toward covering fixed costs, calculated as selling price per unit minus variable cost per unit. It's the central figure in break-even analysis because it directly determines how many units must be sold to cover fixed costs (break-even = fixed costs ÷ contribution margin) and how quickly profit accumulates on every unit sold beyond that point.
How does a price increase affect the break-even point compared to a cost reduction of the same dollar amount?
A price increase raises contribution margin per unit directly and proportionally lowers the number of units needed to break even, while a variable-cost reduction has a similar directional effect but the two aren't always equivalent — a price increase also affects customer demand and competitive positioning, whereas a cost reduction of the same dollar amount doesn't carry that same market risk, even though both lower the break-even point by the same mathematical amount per unit.
References
Reviewed by Sahil, Senior Finance & Tax Editor · Editorial policy