Break-Even Point Formula: How Many Units Must You Sell?
Calculate the sales volume needed to cover fixed costs, with an easy contribution-margin example.
What is the break-even point?
The break-even point is the level of sales where total revenue equals total costs. At that point, operating profit is zero under the assumptions of the model.
Break-even units formula
Break-even units = fixed costs ÷ (selling price per unit − variable cost per unit). The amount in parentheses is contribution margin per unit. This formula assumes the selling price and variable cost per unit remain constant over the relevant range.
Example: a $25 item
If monthly fixed costs are $1,200, the selling price is $25, and variable cost is $10 per item, contribution margin is $15. $1,200 ÷ $15 = 80 units. Selling 80 units covers the modeled fixed and variable costs; selling 79 does not.
Costs to include
Fixed costs might include rent or subscriptions. Variable costs may include materials, packaging, transaction fees and shipping you pay per sale. Classify costs based on how they actually behave in your business.
Check your break-even point
Use Aldervant’s free break-even calculator to test different prices, costs and sales targets.
Examples are illustrative and use the assumptions stated. Business results vary with actual costs, taxes, and operating conditions.