Break‑even Analysis Tool

Break-even analysis answers one question: how many units — or how many dollars of revenue — does this product need to generate before it stops losing money and starts making it? Everything below the break-even point is a loss; everything above it is profit, growing at the rate of your contribution margin.

The Formula This Calculator Runs

Contribution Margin = Price − Variable Cost per Unit Break-even Units = Fixed Costs ÷ Contribution Margin Break-even Sales ($) = Break-even Units × Price

Every unit sold above variable cost contributes something toward covering fixed costs first, then toward profit once fixed costs are fully covered. That "something" is the contribution margin, and it's the single number that determines how steep or gradual your path to profitability is.

Worked Example

A workshop has $15,000 in fixed costs (rent, insurance, a fixed salary), sells a product for $90, and spends $40 in materials and labor per unit:

• Contribution margin = $90 − $40 = $50 per unit
• Break-even units = $15,000 ÷ $50 = 300 units
• Break-even sales = 300 × $90 = $27,000

Sell 299 units and the shop is still underwater; sell 301 and every unit beyond that point drops $50 straight to the bottom line.

This Calculator vs. a Unit/Volume Break-Even Tool

This page frames break-even the way most single-product businesses actually think about it: a price, a per-unit cost, and a dollar figure in fixed overhead, producing both a unit count and a revenue target you can hand to a sales team. If your situation is closer to pure production economics — you care primarily about volume thresholds and capacity planning rather than a specific price point, or you're comparing break-even volume across several manufacturing scenarios — the Break-Even Volume Calculator is built around that framing instead. Use this tool when the question is "how much revenue do I need," and the volume calculator when the question is "how many units must this line produce."

Reading the Margin of Safety Option

Turning on "Include Margin of Safety" doesn't change the break-even point itself — it adds a buffer on top, expressed as a percentage of break-even units, so you can set a realistic sales target rather than a bare-minimum survival number. A 20% margin of safety on a 300-unit break-even means aiming for roughly 360 units before you'd consider the plan financially comfortable.

Where the Model Breaks Down

• It assumes price and variable cost per unit stay flat across the whole volume range — no bulk-purchase discounts on materials, no price cuts to move extra volume.
• Fixed costs are treated as truly fixed; in reality, most "fixed" costs eventually step up once you outgrow current staffing or space.
• It's a single-period snapshot, so it won't capture seasonality or costs that shift month to month.

Further reading: Investopedia — Break-even Analysis and Wikipedia — Break-even Analysis.