How is break-even calculated?

Break-even units = fixed costs ÷ (price − variable cost per unit). The denominator is contribution margin per unit. Example — fixed 5,000, price 50, variable 30 → margin 20 → break-even 250 units.

What are fixed vs variable costs?

Fixed costs stay roughly constant in the period (rent, salaried admin). Variable costs rise with each unit (materials, per-unit shipping). Real costs can be mixed — classify carefully.

Does break-even include tax?

This basic model usually uses pre-tax cost and price figures. Tax can change cash outcomes — treat results as educational estimates, not tax advice.

Should I use this break-even number to set my prices?

No. It is simplified arithmetic for learning and rough planning. See our disclaimer.

Break-Even Calculator — Free Online

How the Math Works

Break-even is the sales volume where contribution from units sold covers fixed costs — profit is about zero in a simplified model. Knowing that volume helps you test whether a price and cost structure can work before you scale.

Vertex Solutions' Break-Even Calculator estimates units needed from fixed costs, price per unit, and variable cost per unit. It is a teaching and sketching tool, not a full business plan.

What the Calculator Shows You

Enter fixed costs, selling price per unit, and variable cost per unit. The calculator returns:

Contribution margin per unit — price − variable cost
Break-even units — fixed costs ÷ contribution margin

Some views also show break-even revenue as units × price.

When This Calculator Helps

Pricing drafts — See how a price cut raises the units needed to break even.
Cost reviews — Test the impact of higher materials cost on break-even volume.
Classroom cases — Work standard managerial accounting examples.
Side projects — Rough-check whether a hobby product can cover fixed fees.

Using the Calculator

Open the Break-Even Calculator on Vertex Solutions.
Enter fixed costs for a clear period (month or year — stay consistent).
Enter price per unit.
Enter variable cost per unit.
Review break-even units (and revenue if shown).

Where the Estimate Falls Short

Real businesses face step-fixed costs, volume discounts, unsold inventory, and multi-product mix. Taxes, interest, and owner draws are outside this basic model. Hitting break-even units on paper does not guarantee cash in the bank if customers pay late.

Estimates only — not accounting, tax, or investment advice. See our disclaimer.

Mistakes to Avoid

Price ≤ variable cost — Every sale loses money before fixed costs; fix pricing or costs first.
Mixing monthly fixed costs with annual targets — Keep the period consistent.
Calling all costs variable — Misclassification warps the margin.
Ignoring sales tax on price — Decide whether price is tax-inclusive; pair with the Sales Tax Calculator if needed.

Getting the Most Out of It

Example: fixed $8,000, price $40, variable $24 → margin $16 → break-even 500 units.
After you have a sell price and cost, check margin with the Profit Margin Calculator.
Use the Percentage Calculator for percent changes in price or cost.
Re-run break-even whenever suppliers change materials pricing.

Fixing Common Mistakes

No break-even or infinite result

Price must exceed variable cost per unit. If contribution margin is zero or negative, you cannot break even by selling more at that price.

Units seem unrealistically high

Fixed costs may be annual while you intended monthly, or price may be too close to variable cost. Align the time period for all inputs.

Confusing revenue with profit

Break-even means profit is roughly zero before other adjustments — sales still occur, but they cover costs in this simplified model.