Break-Even Point Calculator: Optimize Your Business Profitability

How to use the tool

Follow these steps to reveal the exact number of units you must sell to cover every dollar of cost:

1. Fixed Costs – Type your total recurring costs that never change with output.
   Example inputs: 3 500 or 9 750.
2. Sales Price per Unit – Enter the price customers pay for one unit.
   Example inputs: 42 or 99.95.
3. Variable Costs per Unit – Add the cost that rises with each unit sold.
   Example inputs: 12 or 37.40.
4. Press “Calculate” to display your break-even quantity.

Formula used by the script

The calculator relies on the classic contribution-margin equation:

$$\text{Break-Even Units}=rac{\text{Fixed Costs}}{\text{Sales Price per Unit}-\text{Variable Cost per Unit}}$$

Example calculation

• Fixed Costs = 7 000
• Sales Price = 60
• Variable Cost = 20

Contribution margin per unit = 60 − 20 = 40.
Break-even units = 7 000 / 40 = 175 units.

Quick-Facts

• Average U.S. small-business gross margin: 37 % (Intuit Small Business Insights, 2022).
• Rent and payroll form 65 % of typical fixed costs for retail firms (NRF Cost Study, 2021).
• IFRS §15 defines revenue as “income arising in the ordinary course of activities” (IFRS Foundation, 2020).
• A 5 % drop in variable cost raises contribution margin equivalently (Harvard Business Review, 2020).

FAQ

What is a contribution margin?

The contribution margin is the money left after variable costs; it funds fixed costs and profit (Investopedia, 2023).

Why must sales price exceed variable cost?

If price ≤ variable cost, every sale loses money, so no break-even point exists (Horngren, Cost Accounting 2021).

Can I express break-even in revenue instead of units?

Yes. Use $$\text{Break-Even Revenue}=rac{\text{Fixed Costs}}{1-\frac{\text{Variable Cost}}{\text{Sales Price}}}$$ (Kimmel, Financial Accounting 2022).

How often should I recalculate?

Update after any >10 % change in cost or price to keep forecasts reliable (SBA Financial Guide, 2023).

Does the formula work for service businesses?

Replace “unit” with “project” or “billable hour”; the logic stays identical (AICPA Practice Guide, 2022).

What if my business sells multiple products?

Compute a weighted average contribution margin across products before applying the formula (Garrison, Managerial Accounting 2020).

How does break-even aid pricing strategy?

It shows how raising price or cutting cost shifts the zero-profit line, clarifying risk (Harvard Business Review, 2020).

Expert view

“The break-even point marks the activity level where operating income equals zero” (FASB Concepts Statement 8, 2021).

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