| Units Sold | Revenue | Variable Costs | Fixed Costs | Profit / Loss |
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How to calculate your break-even point
The break-even point is the sales volume at which revenue exactly covers fixed and variable costs: no profit, no loss. Every unit sold after that adds its full contribution margin to profit.
Formula
Contribution margin per unit = Price - Variable cost per unit Break-even units = Fixed costs / Contribution margin per unit Break-even revenue = Break-even units x Price
Example
Fixed costs $10,000 per month, price $50, variable cost $30. Contribution margin = $20. Break-even = $10,000 / $20 = 500 units, or $25,000 in monthly revenue.
Frequently asked questions
What costs are fixed and which are variable?
Fixed costs don't change with sales volume (rent, salaries, software). Variable costs grow with each unit sold (materials, payment fees, shipping, commissions).
How can I lower my break-even point?
Raise prices, cut variable costs per unit, or reduce fixed costs. Raising price usually has the biggest effect because it goes straight to contribution margin.
What is the margin of safety?
How far current sales are above break-even: (Actual sales - Break-even sales) / Actual sales. It shows how much sales can drop before you start losing money.