Break-even point: units, revenue and margin explained
Find the sales volume needed to cover fixed and variable costs, with a worked example and practical limits for pricing decisions.
Calculate contribution per unit
Contribution margin per unit = selling price − variable cost per unit. If a product sells for 25 and variable materials, payment fees and delivery cost 10 per unit, each sale contributes 15 toward fixed costs. Fixed rent, software and salaries of 3,000 per month require 3,000 ÷ 15 = 200 units to break even. Test your own values in the break-even calculator.
Convert units to revenue and target profit
At 200 units sold for 25 each, break-even sales revenue is 5,000. If you want 1,500 profit before tax, required units = (3,000 + 1,500) ÷ 15 = 300, and revenue is 7,500. Round required units upward when the quotient is not whole. If price is no greater than variable cost, selling more of that product cannot cover fixed costs under these assumptions.
Check the assumptions before changing price
The simple model assumes the same price and per-unit variable cost across all units, enough production capacity and predictable fixed costs. Discounts, returns, taxes and product mixes change the answer. Compare a proposed price change using the percentage change calculator, and include irregular overhead in the budget guide before relying on the monthly target.