Accounting Break-Even Point Calculator
Calculate the sales units and revenue needed to cover fixed and variable costs and reach your break-even point.
Overview
This Accounting Break-Even Point Calculator estimates the number of units and amount of sales revenue needed to cover your fixed costs. Enter your fixed costs, average selling price, variable cost per unit, and an optional profit target to support pricing and sales planning.
How it works
The calculator first subtracts variable cost per unit from selling price per unit to find the contribution margin. Each unit sold contributes this amount toward fixed costs. Break-even units equal fixed costs divided by contribution margin per unit. Break-even revenue is then calculated by multiplying the required units by the selling price. If you enter a target profit, that profit is added to fixed costs before calculating the required units and revenue.
How to use this calculator
- 1Enter total fixed costs for the period you want to assess.
- 2Add the average selling price you receive for one unit.
- 3Enter the variable cost incurred for each unit sold.
- 4Set a target profit if you want to calculate sales needed above break-even.
- 5Review the required sales volume, revenue, and contribution margin.
Example Calculation
Total fixed costs
$10,000
Selling price per unit
$50
Variable cost per unit
$30
Target profit
$5,000
Break-even sales volume
500 units
With fixed costs of 10,000, a selling price of 50, and variable costs of 30 per unit, the contribution margin is 20 per unit. The business breaks even at 500 units or 25,000 in revenue. To make a 5,000 profit, it needs to sell 750 units and generate 37,500 in revenue.
Frequently asked questions
What is a break-even point?
The break-even point is the sales level at which total revenue equals total costs. At this point, the business has neither a profit nor a loss.
How is break-even sales volume calculated?
Break-even sales volume is calculated as fixed costs divided by contribution margin per unit. Contribution margin per unit is selling price minus variable cost per unit.
What costs are fixed costs?
Fixed costs are expenses that generally do not change directly with short-term sales volume, such as rent, core salaries, insurance, and certain subscriptions.
What costs are variable costs?
Variable costs change with sales volume. Common examples include materials, direct labor paid per unit, sales commission, packaging, payment processing, and shipping.
Why is my break-even point very high?
A high break-even point can result from high fixed costs, a low selling price, high variable costs, or a combination of these factors. A smaller contribution margin means more units are needed to cover fixed costs.
Can I use this calculator for service businesses?
Yes. Treat one billable job, customer engagement, subscription, or billable hour as a unit, provided you can estimate the average price and variable cost for that unit.
What happens if variable cost is equal to or higher than selling price?
There is no practical break-even point under that pricing structure because each sale does not contribute toward fixed costs. Review the selling price, variable costs, or business model.
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Assumptions and warnings
Assumptions
- All inputs relate to the same accounting period, such as a month, quarter, or year.
- The selling price and variable cost per unit remain consistent across the calculated sales volume.
- Fixed costs do not change within the relevant range of activity.
- Results are estimates and do not include changes in product mix, discounting, taxes, financing costs, or capacity constraints.
Warnings
- This calculator provides a planning estimate only and is not accounting, financial, or business advice.
- A break-even result is meaningful only when the selling price per unit is higher than the variable cost per unit.