How to use the Break-Even Calculator
- Enter your fixed costs for the period, for example monthly rent, salaries and subscriptions.
- Enter the price at which you sell one unit.
- Enter the variable cost of one unit, such as materials, packaging and delivery.
- Read the units and revenue you need to break even, and use the table to see how fixed costs change the target.
Formula used
Break-even units = fixed costs ÷ (selling price − variable cost per unit). Break-even revenue = units × selling price.
Worked example
Here is the Break-Even Calculator worked through with the example values shown above, so you can check each step by hand.
| Inputs | |
|---|---|
| Fixed costs (per month) | ₹1,00,000 |
| Selling price per unit | ₹500 |
| Variable cost per unit | ₹300 |
| Result | |
| Break-even units | 500 |
| Break-even revenue | ₹2,50,000 |
| Contribution per unit | ₹200 |
| Contribution margin | 40% |
Break-even at different fixed costs
With the default price and variable cost, higher fixed costs need more sales to cover.
| Fixed costs (per month) | Break-even units | Break-even revenue |
|---|---|---|
| ₹50,000 | 250 | ₹1,25,000 |
| ₹1,00,000 | 500 | ₹2,50,000 |
| ₹2,00,000 | 1,000 | ₹5,00,000 |
| ₹5,00,000 | 2,500 | ₹12,50,000 |
Fixed costs, variable costs and contribution
Fixed costs do not change with sales, for example rent and salaries. Variable costs rise with every unit you sell. The difference between the price and the variable cost is the contribution per unit, the amount each sale adds towards fixed costs and then profit.
With fixed costs of ₹1,00,000, a price of ₹500 and a variable cost of ₹300, the contribution is ₹200 per unit, or 40% of the price. You need 500 units to cover ₹1,00,000, which is ₹2,50,000 in revenue.
Using break-even to make decisions
If you want to earn a profit of ₹50,000 a month on top, add it to the fixed costs: ₹1,50,000 ÷ ₹200 = 750 units. If you cut the variable cost to ₹250, the contribution rises to ₹250 and break-even falls to 400 units. If you raise the price to ₹550, break-even falls to 400 units.
This kind of what-if analysis shows which lever matters most: price, cost, or the fixed costs you carry.
A worked example for a small shop
Imagine a cafe with ₹1,50,000 of monthly fixed costs. Each coffee sells for ₹150 and costs ₹50 in ingredients and cups. The contribution is ₹100, so the cafe needs 1,500 coffees a month, or about 50 a day, just to break even.
Once you see that number, you can ask whether it is realistic for your location and opening hours.
Limits of break-even analysis
The method assumes a single product, a constant price and constant costs. Real businesses sell several products, offer discounts and face costs that jump when they grow, for example hiring another person. For several products, use an average price and an average variable cost based on your sales mix.
Also remember taxes and loan repayments. Include interest as a fixed cost and consider GST separately.
Using break-even in decisions
Break-even units equal the fixed costs divided by the contribution per unit (price minus variable cost). With fixed costs of 50,000, a price of 500 and a variable cost of 300, the contribution is 200 per unit and the break-even is 250 units. Raise the price to 550 and the contribution becomes 250, so break-even falls to 200 units.
Compare break-even with your realistic sales. The margin of safety is how far expected sales are above break-even, as a share of expected sales: if you expect 400 units against a break-even of 250, the margin of safety is 37.5%. Remember that costs are rarely perfectly fixed or variable, so test a range of prices and costs.
Frequently asked questions
What is the break-even point?
It is the sales level where total revenue equals total costs, so profit is zero.
How is break-even calculated?
Divide the fixed costs by the contribution per unit, which is the selling price minus the variable cost per unit.
What is contribution margin?
It is the contribution per unit divided by the price, shown as a percentage. It tells you how much of each rupee of sales is left after variable costs.
Why does the answer round up?
You cannot sell part of a unit, and selling one fewer would leave you just short of break-even.
How do I include a profit target?
Add the profit you want to the fixed costs before dividing.
Is rent a fixed or variable cost?
Normally fixed. Some arrangements, such as a revenue-share rent, are partly variable.
What is the margin of safety?
How far expected sales are above break-even, as a percentage of expected sales. Expected sales of 400 against a break-even of 250 give 37.5%.
This calculator gives estimates for information only. Actual figures from a bank, employer, tax authority or doctor may differ. It is not financial, tax, legal or medical advice.