Pricing & Break-Even Calculator
Find out how many units you need to sell each month to cover your costs, how much room you have before you make a loss, and the sales needed to reach your target profit. Free and instant, using Cost-Volume-Profit analysis.
Method Cost-Volume-Profit (CVP) analysis: break-even revenue = fixed costs ÷ contribution margin ratio
Enter your figures
How the break-even calculation works
The calculator uses Cost-Volume-Profit (CVP) analysis, the standard management accounting model:
- Work out the contribution per unit. Selling price minus variable cost per unit. This is what each sale contributes towards your fixed costs.
- Find the break-even point. Break-even units = fixed costs ÷ contribution per unit, rounded up. Break-even revenue = fixed costs ÷ contribution margin ratio.
- Compare with your expected sales. The gap between expected sales and break-even is your margin of safety; the contribution on sales above break-even is your profit.
Worked example
A business sells a product for US$25. Each unit costs US$12 in materials and packaging, fixed costs are US$8,000 a month, and it expects to sell 1,000 units a month.
| Item | Result |
|---|---|
| Contribution per unit (25 − 12) | US$13.00 (52.0%) |
| Break-even units (8,000 ÷ 13 = 615.38, rounded up) | 616 units |
| Break-even revenue (8,000 ÷ 52%) | US$15,384.62 |
| Expected profit (1,000 × 13 − 8,000) | US$5,000.00 |
| Margin of safety | 38.5% |
A 10% price cut to US$22.50 looks small, but the business would then need to sell 1,239 units a month, 24% more, just to keep its US$5,000 profit.
Frequently asked questions
What is a break-even point?
It is the level of sales at which total revenue equals total costs, so the business makes neither a profit nor a loss. Below it you make a loss; every unit sold above it adds to profit.
What is contribution?
Contribution is the selling price minus the variable cost of one unit. It is the amount each sale contributes towards fixed costs and, once those are covered, towards profit. The contribution margin ratio is contribution as a percentage of the price.
Which costs are fixed and which are variable?
Variable costs rise with each unit you sell: materials, packaging, delivery per order, sales commission. Fixed costs stay the same whatever you sell within a normal range: rent, salaries, insurance, loan repayments, software subscriptions. Some costs are partly both; split them as best you can.
Why is break-even revenue not exactly break-even units × price?
Break-even units are rounded up to a whole unit, because you cannot sell part of one. Break-even revenue is calculated directly as fixed costs ÷ contribution margin ratio, so it is the exact revenue at which the business breaks even. The difference is small and comes only from that rounding.
What is the margin of safety?
The margin of safety is how far your expected sales are above break-even, shown in revenue, units and as a percentage of expected revenue. A 30% margin of safety means sales could fall by 30% before you start making a loss.
Should I cut my price to sell more?
Only if the extra volume more than makes up for the lower contribution per unit. The professional report shows, for price cuts and rises of 5% and 10%, exactly how many units you would need to sell just to keep today's profit.
What does the calculator assume?
One product (or a constant mix of products), a constant selling price and variable cost per unit, fixed costs that stay fixed at the sales levels involved, and units sold equal to units produced. These are the standard Cost-Volume-Profit assumptions.
Results depend on the figures you enter and on the standard Cost-Volume-Profit assumptions. They are not financial advice. For help with pricing or costing, talk to our team.