Break-Even Point Calculator
The volume at which revenue covers cost, with the margin of safety against your current sales and a price change you can test. A ten percent price cut usually needs a far larger volume increase than people expect, and this page shows how much larger.
Also called: break even point calculator, breakeven analysis.
800 units a month covers 400,000 of fixed cost at a contribution margin of $500.00 a unit. At 900 units you are 100 above break-even, a margin of safety of 11.1%, and the month makes 50000. Each unit contributes 500, which is 41.7% of the price. Use the price change field to see how hard a discount hits: the cut comes entirely out of that contribution.
Profit by volume
Hover or drag for valuesVolume against profit
| Units | Revenue | Contribution | Profit |
|---|---|---|---|
| 0 | $0 | $0 | -$400,000 |
| 200 | $240,000 | $100,000 | -$300,000 |
| 400 | $480,000 | $200,000 | -$200,000 |
| 600 | $720,000 | $300,000 | -$100,000 |
| 800 | $960,000 | $400,000 | $0 |
How this is calculated
Only the contribution margin, price less variable cost, pays down fixed costs, so the break-even is the fixed cost divided by that margin. The leverage in the denominator is the whole story: at a five hundred rupee margin on a twelve hundred rupee price, cutting the price by ten percent removes a hundred and twenty from a margin of five hundred, so nearly a quarter of the contribution goes and the break-even rises by almost a third. The margin of safety, how far current sales sit above break-even, is the figure that says how much room a business has before a bad month becomes a loss.
fixed costs divided by what each unit contributes after its own variable cost, which is why a price cut moves the break-even far more than a cost cut of the same size- F
- Fixed costs
- p
- Price a unit
- v
- Variable cost a unit
Method and limits
What it assumes
- Fixed costs stay fixed across the volume range, which fails once capacity is added.
- A constant price and variable cost per unit, so no volume discounts on either side.
What it deliberately does not model
- Semi-variable costs, which rise in steps, break the straight-line model at the step.
- A break-even in units says nothing about cash timing, and a profitable month can still be a cash-negative one.
Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator
Frequently asked questions
- Why does a small price cut need such a large volume increase?
- Because the cut comes entirely out of the contribution margin. If the margin is forty percent of the price, a ten percent price cut removes a quarter of the margin, and the volume has to rise by a third just to stand still.
- What is a healthy margin of safety?
- It depends on how volatile the sales are. A business with steady demand can run close to break-even; one with seasonal or lumpy revenue needs far more room, because the margin of safety is what absorbs a bad month.