How to calculate break-even
Separate fixed and variable costs.
1
Add fixed costs
Rent, salaries, software and other costs that do not vary with units.
2
Enter price and variable cost
Use per-unit figures before tax.
3
Check the contribution
If price is below variable cost, more sales increase the loss.
What does this tool do?
Break-even is the point where revenue equals total costs. This calculator uses a per-unit price and variable cost to find the contribution margin, then divides fixed costs by that margin.
The Formula
Units = Fixed costs ÷ (Price − Variable cost per unit)Frequently Asked Questions
What is contribution margin?
It is price minus variable cost per unit, the amount each sale contributes to fixed costs and profit.
Does break-even include owner salary?
Only if you include it in fixed costs. A business can be accounting break-even while still not paying the owner a market salary.