Find the number of units you must sell to cover your costs, plus break-even revenue.
1,000
Break-even revenue
$25,000.00
Contribution margin
$10.00
| Total cost | $10,000.00 | $17,500.00 | $25,000.00 | $32,500.00 | $40,000.00 |
|---|---|---|---|---|---|
| Total revenue | $0.00 | $12,500.00 | $25,000.00 | $37,500.00 | $50,000.00 |
The break-even point is where your total revenue equals your total cost—the line where profit stops being negative. Below that quantity, you lose money; above it, you profit. This calculator finds that critical quantity by dividing your fixed costs by your contribution margin: the difference between your selling price and the variable cost per unit. Contribution margin is the engine of break-even analysis—it tells you how much revenue from each unit goes toward covering fixed costs before any profit appears. The chart shows two lines: your total cost (fixed costs plus variable costs multiplied by quantity) and your total revenue. They cross at the break-even point. Price above that crossing, and the revenue line dominates. Price below, and you are underwater.
A coffee shop spends $10,000 per month on rent, utilities, and staff—its fixed costs. Each cup sells for $5; the beans, cup, and lid cost $2 to provide—its variable cost. The contribution margin is $3 per cup. To break even, the shop needs to sell 10,000 ÷ 3 ≈ 3,333 cups per month, generating $16,667 in revenue. Sell fewer, the shop runs a loss; sell more, profit flows.
Raising the price to $6 per cup (same $2 variable cost) lifts the contribution margin to $4, which cuts the break-even quantity to 2,500 units—a 25% drop. Revenue at break-even becomes $15,000. Even small price increases can slash the break-even point, especially in businesses with small margins and high fixed costs.
What is the break-even point?
It is the quantity or revenue level at which your business covers all costs and makes neither a profit nor a loss. Below that point, expenses exceed income; above it, profit emerges. In this tool, the chart shows it as the intersection of the cost line and the revenue line.
What is contribution margin?
Contribution margin is the revenue left over after paying variable costs. It is the amount per unit available to cover fixed costs and contribute to profit. A high contribution margin means each unit works harder for you; a low margin means you need more volume to break even. In this tool, you see it directly in the outputs.
What happens if my price is below my variable cost?
You lose money on every sale because the revenue from each unit does not cover the cost to produce it. Your contribution margin becomes negative, and mathematically, break-even is impossible—there is no quantity at which you stop losing money. This tool shows 0 units and 0 revenue in that scenario, signaling a pricing or cost problem that must be fixed before you can operate profitably.
Is this the same as profit margin?
No. Profit margin is a per-unit percentage of revenue left as profit after all costs. Break-even is about the quantity you need to sell to stop losing money—it focuses on covering fixed costs, not on what remains afterward. A business can have a healthy contribution margin but still operate at a loss if fixed costs are too high, or break even and beyond with a thin margin if volume is sufficient.