How break-even is calculated
Contribution margin
Price per unit − variable cost per unit. Example: 50 − 30 = 20 per unit towards fixed costs.
Break-even units
Fixed costs ÷ contribution margin. 12,000 ÷ 20 = 600 units. A fraction is rounded up: you can’t sell half a unit.
Break-even sales
Fixed costs ÷ contribution margin ratio. Here 20 ÷ 50 = 40%, so 12,000 ÷ 0.4 = 30,000 in sales.
Getting a realistic answer
Split fixed from variable: Rent and salaries are fixed; goods, packaging, shipping and payment fees are variable because they grow with every sale.
Use one period: If fixed costs are monthly, the break-even and expected units are monthly too.
More than one product? Use the average price and average variable cost of your sales mix, or work out each product on its own.
Margin of safety: How far expected sales can fall before you make a loss. The bigger, the safer.
FAQ
What is the break-even point?
The sales level where revenue equals total cost, so there is no profit and no loss. Every unit sold after it adds its contribution margin as profit.
Break-even in units vs in sales?
Units is how many items you must sell; sales is the revenue amount. Sales = fixed costs ÷ contribution margin ratio.
How do I find the break-even point for a restaurant?
Add up monthly fixed costs (rent, salaries, utilities, subscriptions), use the average bill as the price and the average food and packaging cost as the variable cost. The result is the orders a month you need.
What if my price is below the variable cost?
There is no break-even point: each sale deepens the loss. Raise the price or cut the variable cost first.
How do I find the sales needed for a target profit?
Add the target profit to fixed costs and divide by the contribution margin. Open “Target profit and expected sales” and the calculator does it.