How to calculate your break-even point
Understand fixed costs, variable costs, contribution, and the limits of break-even analysis.
By Yoravex · Updated October 20, 2026 · Educational guide
Separate fixed and variable costs
Fixed costs stay broadly the same within a relevant operating range: rent and monthly software subscriptions are examples. Variable costs change with each sale: packaging, materials, and transaction fees may belong here. Some costs contain both parts. Use the same time period for every input; monthly overhead should be compared with monthly sales.
Calculate contribution per unit
Subtract variable cost per unit from selling price per unit. A price of 50 and variable cost of 30 leave 20 toward overhead and profit. If price is equal to or below variable cost, additional sales do not cover positive fixed costs. The calculator should show that there is no finite break-even volume under those assumptions.
Divide fixed costs by contribution
With fixed costs of 10,000 and contribution of 20, break-even volume is 500 units. Revenue at that volume is 25,000. If the division gives 500.2 units, round up to 501 because a fraction of an indivisible product cannot be sold. The rounded revenue is the revenue at that whole-unit sales volume.
Add a profit target
To plan for operating profit, add the target profit to fixed costs before dividing by contribution. A target of 5,000 with the same 10,000 fixed costs and 20 contribution requires 750 units. This is a simplified operating model, not an after-tax earnings forecast.
Test what changes
Try a lower selling price, higher material cost, or increased rent to see how required volume moves. A single-product model assumes the same contribution on each sale. Multiple products, capacity limits, seasonal demand, and stepped staffing costs require a more detailed model. Break-even volume is a requirement, not evidence that customers will buy that many units.
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