Break-Even Calculator
Where revenue crosses total cost, and how far sales could fall before a loss.
- Units above break-even
- 7500
- Sales could fall this far before a loss
- 37.5%
- Operating leverage — profit swing per 1% of sales
- 2.67x
- Revenue
- Total cost
Break-even is where the two lines cross: fixed costs divided by the contribution each unit makes after its own variable cost. Contribution, not profit, is what does the work — every unit sold above break-even adds its full contribution straight to profit, which is why operating leverage rises as you approach break-even and falls away above it. A business with high fixed costs and thin variable costs has a distant break-even and violent operating leverage on either side of it; one with low fixed costs breaks even early and grinds. Margin of safety is the more useful planning number: it says how far sales can fall before you are into a loss. If the contribution per unit is zero or negative there is no break-even at any volume, and the answer is a pricing or cost decision rather than a sales-target one.
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Independent · No commissions · No fund-house data — how the numbers are computed
How it works
Break-even is the volume at which revenue finally covers total cost. It is fixed costs divided by the contribution each unit makes after paying for its own variable cost — and contribution, not profit, is what does the work, because every unit sold beyond break-even adds its full contribution straight to the bottom line.
The more useful planning figure is the margin of safety: how far sales could fall before you are into a loss. A business trading just above break-even has almost none, which is the same thing as saying its profit is extremely sensitive to volume.
That sensitivity is operating leverage. High fixed costs with thin variable costs give a distant break-even and violent swings on either side of it; low fixed costs break even early and grind. Neither is better in the abstract — they suit different levels of demand certainty.
Break-even units = fixed costs / (price per unit - variable cost per unit). Break-even revenue = break-even units x price. Margin of safety = (actual sales - break-even sales) / actual sales.If the contribution per unit is zero or negative, there is no break-even at any volume — every unit loses money before a rupee of fixed cost is covered, and the answer is a pricing or cost decision rather than a sales target.
Frequently asked questions
What counts as a fixed cost and what is variable?
Fixed costs do not change with volume over the period in question — rent, salaries, insurance, software subscriptions. Variable costs scale with each unit sold: materials, packaging, payment-gateway fees, per-unit shipping. The distinction is about the period, not the account: a salary is fixed this quarter and variable over three years, so classify against the horizon you are planning for.
What is operating leverage and why does it matter?
It is how sharply profit moves for a given move in sales. A business with high fixed costs and thin variable costs has high leverage: profit is violently sensitive to volume in both directions. It is a good thing when demand is reliable and growing, and dangerous when demand is uncertain, because the same structure that magnifies profit above break-even magnifies losses below it.
Can I break even at a lower volume without raising prices?
Yes, by cutting either fixed costs or variable costs, and the two work differently. Cutting fixed costs lowers the break-even point directly. Cutting variable costs raises the contribution per unit, which lowers break-even and also improves every unit sold above it. If demand is uncertain, converting fixed costs into variable ones — outsourcing, usage-based tooling — lowers your break-even and your risk together, at the price of a lower ceiling.