Break Even Calculator Formula

Understand the math behind the break even calculator. Each variable explained with a worked example.

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Formulas Used

Break Even Units

break_even_units = (price_per_unit - variable_cost) > 0 ? ceil(fixed_costs / (price_per_unit - variable_cost)) : 0

Break Even Revenue

break_even_revenue = (price_per_unit - variable_cost) > 0 ? ceil(fixed_costs / (price_per_unit - variable_cost)) * price_per_unit : 0

Contribution Margin Per Unit

contribution_margin = price_per_unit - variable_cost

Variables

VariableDescriptionDefault
fixed_costsFixed Costs(USD)10000
price_per_unitPrice Per Unit(USD)50
variable_costVariable Cost Per Unit(USD)20

How It Works

How to Calculate Break Even Point

Formula

Break Even Units = Fixed Costs / (Price Per Unit - Variable Cost Per Unit)

The denominator is called the contribution margin -- the amount each unit contributes toward covering fixed costs. Once all fixed costs are covered, every additional unit sold generates profit.

Worked Example

A business has $10,000 in fixed costs. Each unit sells for $50 with a variable cost of $20.

fixed_costs = 10000price_per_unit = 50variable_cost = 20
  1. 01Contribution margin = $50 - $20 = $30 per unit
  2. 02Break even units = $10,000 / $30 = 334 units
  3. 03Break even revenue = 334 x $50 = $16,700

Ready to run the numbers?

Open Break Even Calculator