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How to Calculate Break-Even Point: Formula & Example

Calculate break-even units and revenue from fixed costs, selling price and variable cost per unit, with a worked contribution-margin example.

Content updated: 2026-10-21

The core formula

If price is 40, variable cost is 24 and fixed costs are 8,000, contribution is 16 per sale and break-even is 500 units. This assumes the unit economics stay constant.

Contribution per Unit = Price − Variable Cost
Break-Even Units = Fixed Costs ÷ Contribution per Unit

Worked example

$10,000 fixed cost ÷ $40 contribution = 250 units.

How to calculate break-even volume

  1. Separate fixed costs from costs that change with each unit sold.
  2. Subtract variable cost per unit from selling price to get contribution per unit.
  3. Divide total fixed costs by contribution per unit to estimate break-even units.
  4. Multiply break-even units by selling price if you also want break-even revenue.

What break-even tells you

The break-even point is the sales volume where contribution covers fixed costs and operating profit is approximately zero. Sales above that level add contribution toward profit; sales below it leave some fixed costs uncovered.

Break-even is highly sensitive to price and variable cost. A small discount or fee increase can raise the required unit volume, so recalculate when pricing, fulfillment or advertising costs change.

Common mistakes

  • Putting fixed costs into the per-unit variable cost twice.
  • Using revenue instead of contribution per unit in the denominator.
  • Ignoring a price discount that reduces contribution while keeping the old break-even target.

Use the calculator

See how many units you must sell to cover fixed and variable costs.

Open Break-Even Calculator

Break-even depends on contribution per unit

If price is 40, variable cost is 24 and fixed costs are 8,000, contribution is 16 per sale and break-even is 500 units. This assumes the unit economics stay constant.

What breaks a simple break-even model

Tiered prices, multiple products, changes in fixed cost and capacity constraints can move the threshold. For mixed product lines use a weighted-average contribution margin or a separate scenario model.

Frequently asked questions

Can break-even units be fractional?

The formula can return a fraction, but physical units normally require rounding up to the next whole unit.

What happens if variable cost is higher than selling price?

Contribution is zero or negative, so selling more units cannot cover fixed costs under that pricing structure.

Is break-even the same as a profit target?

No. Break-even targets zero operating profit; a profit target requires extra contribution above fixed costs.

What should I verify about what breaks a simple break-even model?

Tiered prices, multiple products, changes in fixed cost and capacity constraints can move the threshold. For mixed product lines use a weighted-average contribution margin or a separate scenario model.