How to Calculate Break-Even

1.What break-even is

Break-even is the unit count where total contribution equals fixed costs, so operating profit is zero before taxes and extras. Each unit contributes price minus variable cost. Stack enough of those contributions and they cover the rent, salaries, and other costs that do not move with volume. If price does not exceed variable cost, no finite break-even exists. Fees and taxes are omitted here.

2.The formula

Contribution per unit is P − V. Units to break even are Q = F / (P − V). Break-even revenue is Q × P. F is fixed cost, P is price per unit, and V is variable cost per unit. Price must exceed variable cost or the denominator is zero or negative. The break-even calculator on this site reports both units and revenue from those three inputs.

\[ Q = \frac{F}{P - V},\quad \mathrm{Revenue} = Q\cdot P \]

3.Worked example

Take fixed costs of $12,000, a $40 price, and a $15 variable cost per unit — the same defaults as the break-even calculator. Contribution is 40 − 15 = $25. Then Q = 12000 / 25 = 480 units. Break-even revenue is 480 × 40 = $19,200. At that volume, variable costs are 480 × 15 = $7,200; adding the $12,000 fixed costs matches the $19,200 of sales.

\[ Q=\frac{12000}{40-15}=480,\quad 480\times 40=19200 \]

4.Contribution ladder

Move fixed cost, price, and variable cost to see units and revenue update. The ladder shows variable cost plus contribution stacking to the unit price, then how many of those contribution rungs it takes to cover fixed costs. This is a teaching widget — one product, constant costs, no fees, no full calculator chrome. Open the break-even calculator when you want the standalone tool.

5.Open the full calculator

The break-even calculator uses the same Q = F / (P − V) identity, the same $12,000 / $40 / $15 example, and the same limitation that taxes and fees are omitted. Browse other business tools if you need contribution margin or a related cost-volume figure next.