What Is Break-Even Analysis?
Break-even analysis estimates the sales level at which revenue covers fixed and variable costs. Below that point the entered scenario produces a loss; above it, each additional contribution moves the scenario toward profit.
Break-even units
Fixed Costs ÷ Contribution per Unit
Break-even revenue
Fixed Costs ÷ Contribution Margin Ratio
Unit Method vs. Revenue Method
Unit sales method
Best when you know the selling price and variable cost per product, booking, hour, subscription, or other measurable unit. It returns exact and practical whole-unit targets.
Revenue ratio method
Best when a business tracks an overall contribution margin ratio, particularly for services or a mix of products with different selling prices and costs.
Contribution Margin Explained
Contribution is not the same as net profit. It is the amount left after variable costs, available to cover fixed costs. Once fixed costs are covered, additional contribution becomes operating profit under the calculator's assumptions.
- Selling price after any planned discount
- Direct materials or product acquisition cost
- Packaging and fulfillment per unit
- Sales commissions and payment-processing fees
- Shipping or delivery paid per sale
- Other costs that change directly with volume
Target Profit and Margin of Safety
Breaking even is only the first threshold. A target-profit calculation adds the desired profit to fixed costs before applying the contribution formula. Margin of safety compares forecast sales with break-even sales and shows how much sales can fall before the scenario reaches a loss.
Target-profit units
(Fixed Costs + Target Profit) ÷ Contribution per Unit
How to Use the Result Responsibly
Basic break-even analysis assumes that price, variable cost, fixed cost, and product mix remain stable across the relevant sales range. Real operations may have volume discounts, overtime, capacity limits, step-fixed costs, returns, bad debt, changing demand, or multiple products with different contribution margins.
Recalculate with conservative and optimistic inputs rather than treating one result as a guarantee. For accounting, investment, or tax decisions, confirm figures with the relevant records and a qualified professional.
Private Browser-Based Calculation
Your prices, costs, sales forecasts, and profit targets stay on your device. The calculator does not upload these figures or require an account.