How it works
Break-even units = fixed costs ÷ (price − variable cost), rounded up to a whole unit.
A worked example
Fixed costs of 10,000, price of 50 and variable cost of 30 require 500 units to break even.
What to keep in mind
Assumes a single product or constant product mix, fixed prices and constant per-unit costs. Use one consistent time period for fixed costs and sales.
The break-even formula
Break-even units = fixed costs ÷ (selling price − variable cost per unit). The amount left from each sale after variable costs is the contribution per unit. Once enough contributions add up to your fixed costs, you have broken even.
Worked example
With fixed costs of £10,000, a selling price of £50 and a variable cost of £30, each sale contributes £20. You need 10,000 ÷ 20 = 500 units, or £25,000 of revenue, to break even.
Fixed costs versus variable costs
Fixed costs stay the same however much you sell, such as rent, salaries, insurance and software. Variable costs rise with each sale, such as materials, packaging, payment fees and delivery.
Frequently asked questions
Why is the result rounded up?
You need to sell complete units. Rounding down could leave some fixed costs uncovered.
How do I calculate break-even revenue?
Multiply the break-even units by the selling price. You can also divide fixed costs by the contribution margin ratio.
What if my price is lower than my variable cost?
You will never break even, because each sale loses money. Raise the price or reduce variable costs first.
Which time period should I use?
Use the same period for everything. If you enter monthly fixed costs, the result is the number of units needed each month.
For general information and planning, not personalised financial or tax advice. Verify important decisions with a qualified adviser.