How It Works
Each unit contributes selling price minus variable cost toward fixed costs. Break-even units equal fixed costs divided by contribution margin per unit.
The contribution margin per unit is the selling price minus the variable cost per unit. Fixed costs are recovered from that contribution, so break-even units equal fixed costs divided by contribution margin.
The result is a planning estimate under constant price and cost assumptions. It does not model taxes, financing, changing prices, capacity limits, or multiple products with different margins.
Formula
- F — Fixed costs
- P — Selling price per unit
- V — Variable cost per unit
Example
Example inputs: Fixed costs $10,000, price $50, variable cost $20.
Result: Break-even: about 334 units and $16,700 in sales.
Frequently Asked Questions
What if variable cost equals selling price?
There is no contribution margin, so the fixed costs cannot be recovered through unit sales at that price.
What is the contribution margin?
It is the amount from each sale left after variable costs that can be used to cover fixed costs and then contribute to profit.
What happens after break-even?
Once fixed costs have been covered, additional contribution margin can increase operating profit, assuming the price and variable-cost assumptions remain valid.
This calculator provides estimates for informational purposes only and should not be considered financial, tax, or legal advice.