Break-Even Calculator

The break-even point is the single most useful number in small business math, and it is also the number most owners never actually calculate. It answers one question with no ambiguity: how many units of your product or service do you have to sell in a given period before every dollar of fixed overhead is covered and the next sale becomes profit? Below that line, you are funding the business out of savings or a loan. Above it, you are running a business that pays for itself.

This calculator is built for people who are pricing a new product, evaluating whether a location or a piece of equipment is worth the fixed cost it adds, or sanity-checking a sales forecast against reality. It takes four inputs, total fixed operating costs, the price you charge per unit, the variable cost to produce or deliver each unit, and your projected unit sales, and returns the break-even volume in both units and revenue, plus a margin of safety that tells you how much cushion you have if sales come in soft.

Unlike a general profitability calculator, this tool is deliberately narrow: it assumes a single product or a blended average price and cost across your product mix, and it assumes fixed costs stay fixed across the volume range you are testing. That narrowness is what makes the math exact and the output actionable rather than a vague range.

The calculator runs on the classic cost-volume-profit (CVP) formula. Contribution margin per unit is the selling price minus the variable cost per unit, the amount each sale contributes toward covering fixed costs before anything is left over as profit:

Contribution Margin per Unit = Selling Price − Variable Cost per Unit

Break-even in units is fixed costs divided by that contribution margin, rounded up to the next whole unit since you cannot sell a fraction of a unit and still cover the last dollar of overhead:

Break-Even Units = Fixed Costs ÷ Contribution Margin per Unit

Break-even revenue restates that same point in dollars using the contribution margin ratio (contribution margin per unit divided by price):

Break-Even Revenue = Fixed Costs ÷ Contribution Margin Ratio

From there, the engine projects revenue, total cost, and profit at your forecasted unit sales, and computes margin of safety, the percentage by which projected sales exceed the break-even point:

Margin of Safety % = (Projected Revenue − Break-Even Revenue) ÷ Projected Revenue

If your selling price is at or below your variable cost per unit, no volume of sales will ever break even; the calculator detects this guard condition and reports "N/A" rather than a misleading negative or infinite unit count. All arithmetic runs through the breakeven primitive using Decimal.js arbitrary-precision math, so there is no floating-point drift when scaling to large production volumes.

Using the calculator's own baseline defaults: $50,000 in total fixed costs, a $100 selling price per unit, a $60 variable cost per unit, and 2,000 projected units sold.

1. Contribution margin per unit: $100 − $60 = $40. Every unit sold contributes $40 toward covering fixed overhead.
2. Contribution margin ratio: $40 ÷ $100 = 40.0%.
3. Break-even units: $50,000 ÷ $40 = 1,250 units.
4. Break-even revenue: $50,000 ÷ 0.40 = $125,000.
5. At the projected 2,000 units, revenue is 2,000 × $100 = $200,000, total cost is $50,000 + (2,000 × $60) = $170,000, and projected profit is $200,000 − $170,000 = $30,000.
6. Margin of safety: ($200,000 − $125,000) ÷ $200,000 = 37.5%, meaning sales could fall by more than a third before the business crosses back into a loss. In unit terms, that is 2,000 − 1,250 = 750 units of cushion.

This matches the calculator's verified test vector exactly: 1,250 break-even units, $125,000 break-even revenue, $30,000 projected profit, and a 37.5% margin of safety.

• Multiple products with different margins. This tool assumes one price and one variable cost. If your business sells a mix of high-margin and low-margin items, you need a weighted-average contribution margin across your actual sales mix, not a single product's numbers.
• Step-fixed costs. Real fixed costs are rarely fixed forever; hire a second shift or lease more warehouse space past a certain volume and your "fixed" cost jumps to a new, higher plateau. This calculator holds fixed costs constant across the entire range.
• Taxes. Break-even is calculated on pre-tax operating profit. Income taxes on that profit are not deducted.
• Non-linear variable costs. Bulk purchasing discounts, labor overtime premiums, and rush shipping fees can make true variable cost per unit shift with volume rather than stay constant.
• Timing and cash flow. Break-even measures a static volume threshold, not when in the calendar year you will actually cross it, and it ignores the cash timing gap between when you pay costs and when customers pay you.

• Misclassifying costs. The most common error is putting a semi-variable cost, like a phone bill with a base fee plus per-minute charges, entirely into "fixed" or entirely into "variable." Split it, or your break-even point will be wrong in a way that is hard to detect.
• Using gross revenue price instead of net price. If you sell through a marketplace or distributor that takes a commission, your effective price per unit is lower than your list price. Enter the net amount you actually keep.
• Forgetting returns, discounts, and allowances. If 5% of units get returned or sold at a discount, your effective price per unit is lower than the sticker price you might otherwise enter.
• Treating break-even as a target instead of a floor. Break-even is the point where profit equals zero, not a goal. Businesses that plan to operate exactly at break-even have no cushion for a slow month.
• Ignoring the margin of safety. A business sitting right at its break-even point is more fragile than one with the same profit but a wider gap between projected and break-even sales; margin of safety is what tells you how much bad luck you can absorb.

• U.S. Small Business Administration, "Break-Even Analysis" guidance for business plan financial projections
• Financial Accounting Standards Board (FASB), Accounting Standards Codification on cost classification (fixed vs. variable)
• SCORE (Service Corps of Retired Executives), Cost-Volume-Profit Analysis worksheets for small business planning
• Corporate Finance Institute, contribution margin and break-even analysis methodology references