Learn how to calculate break-even in units and revenue, contribution margin and the break-even point.
The break-even point is the sales level at which the revenue considered exactly covers the relevant costs. Below it, the activity has not yet covered all costs; above it, additional sales contribute to profit.
Use the Bethemesh break-even calculator to calculate both units and required revenue.
Unit contribution margin = Selling price − Unit variable cost
Break-even units = Fixed costs / Unit contribution margin
Contribution margin ratio = Unit contribution margin / Selling price
Break-even revenue = Fixed costs / Contribution margin ratio
With €10,000 fixed costs, a €50 selling price and €30 variable cost, unit contribution margin is €20. Break-even is therefore 500 units or €25,000 in revenue.
Contribution margin is what remains from each sale after the variable cost directly associated with that unit. It first contributes to absorbing fixed costs. A higher selling price at constant variable cost lowers break-even; a higher variable cost does the opposite.
The threshold usually expresses an activity level such as revenue or units. A break-even point can additionally express when that threshold is reached during a period.
Break-even asks how much must be sold to cover costs. ROI asks what return an investment generated relative to its cost. They are complementary: once equilibrium is understood, the ROI calculator can measure overall return.
For pricing analysis, also use the margin calculator.
This simple model assumes relatively constant selling prices and unit variable costs. Businesses with multiple products may also need assumptions about sales mix, discounts, capacity constraints and changing costs.
Understand the ROI formula, how to interpret it, annualize it and recognize its limits when measuring investment profitability.
Learn how to calculate commercial margin, distinguish margin rate from markup rate and set a selling price from a target margin.
Understand what margin, break-even point, ROI and EBITDA measure and when each indicator is useful.