Break-Even Calculator
Break-even is the sales volume at which revenue exactly covers costs. Below it you lose money on every trading day; above it you start making it.
Formula
Break-even units = fixed costs ÷ (price − variable cost)
- Price − variable cost is the contribution per unit
- Break-even revenue = break-even units × price
£10,000 fixed, £25 price, £10 variable: 10,000 ÷ 15 = 667 units
The Formula
Break-even units = Fixed costs ÷ (Price − Variable cost per unit)
The bracket is the contribution margin: what each sale contributes towards fixed costs once its own direct costs are paid.
With £30,000 of fixed costs, a £25 price and £10 of variable cost, each sale contributes £15. You need 30,000 ÷ 15 = 2,000 units, or £50,000 of revenue.
Sorting Fixed From Variable
Fixed costs continue whether you sell anything or not: rent, salaries, insurance, software.
Variable costs arise per sale: materials, packaging, postage, payment processing fees.
Some costs are genuinely mixed — a phone contract with a base fee plus usage — and should be split across both categories rather than forced into one.
Price Moves the Answer Fastest
Because price sits in the denominator, small changes have outsized effects.
Raising the price from £25 to £28 lifts contribution from £15 to £18 and drops break-even from 2,000 units to 1,667 — a 12% price rise cutting the requirement by 17%.
Cutting variable costs works the same way. Reducing fixed costs helps too, but usually more slowly and with harder trade-offs.
Quick Reference
| Fixed costs | Price | Variable | Contribution | Units | Revenue |
|---|---|---|---|---|---|
| £10,000 | £25 | £10 | £15 | 667 | £16,667 |
| £10,000 | £30 | £10 | £20 | 500 | £15,000 |
| £5,000 | £20 | £12 | £8 | 625 | £12,500 |
| £20,000 | £50 | £30 | £20 | 1,000 | £50,000 |
Frequently Asked Questions
- How do I calculate break-even?
- Divide fixed costs by the contribution per unit, which is price minus variable cost. £30,000 of fixed costs at £15 contribution needs 2,000 units.
- What is contribution margin?
- What each sale contributes towards fixed costs after covering its own direct costs. It is the price minus the variable cost per unit.
- Is rent a fixed or variable cost?
- Fixed. It is payable regardless of how much you sell. Variable costs are those that rise directly with each additional sale.
- Why does a small price rise help so much?
- Because it increases contribution per unit while fixed costs stay the same, so fewer units are needed to cover them.