Formula
Break-even units = fixed costs ÷ (price − variable cost per unit)With a profit target: units = (fixed costs + target) ÷ (price − variable cost)Break-even revenue = units × price How it works
The break-even point is the sales volume where total revenue exactly covers total costs, so profit is zero. Every unit sold beyond it adds profit; every unit short of it adds to a loss.
The key number is the contribution margin: the price minus the variable cost of one unit. That is how much each sale contributes toward paying fixed costs. Divide fixed costs by it and you have the number of units to break even. Add a profit target to fixed costs to find the sales needed to earn that profit.
The analysis assumes a constant price and constant variable cost per unit. In practice, discounts, volume pricing and step changes in fixed costs (such as hiring another employee) change the picture, so rerun it for each scenario.
Frequently asked questions
How can I lower my break-even point?
Raise the price, cut variable costs per unit, or reduce fixed costs. Raising the price usually has the biggest effect because it increases the contribution margin of every sale.
What is the contribution margin ratio used for?
It is the share of each sales dollar that covers fixed costs. Dividing fixed costs by the ratio gives break-even revenue directly — handy when you sell many products at different prices.