What is contribution margin?

Contribution margin is the amount each unit sale contributes toward covering fixed costs and generating profit. It is calculated as: Selling Price − Variable Cost per Unit. For example, if you sell a product for $50 and it costs $30 to produce, your contribution margin is $20 per unit. The contribution margin ratio expresses this as a percentage of the selling price: $20 / $50 = 40%.

What are fixed costs vs. variable costs?

Fixed costs stay the same regardless of how many units you produce or sell — examples include rent, salaries, insurance, and loan repayments. Variable costs change directly with production volume — examples include raw materials, packaging, direct labor per unit, and shipping. Understanding the distinction is critical for accurate break-even analysis and pricing decisions.

How can I lower my break-even point?

There are three main levers: (1) Reduce fixed costs — negotiate lower rent, streamline operations, or cut overhead. (2) Reduce variable costs — find cheaper suppliers, improve production efficiency, or reduce waste. (3) Increase selling price — if the market allows, a higher price means each sale contributes more margin, so fewer units are needed to break even. Use this calculator to test each scenario.

What is the margin of safety?

The margin of safety is the difference between your actual (or projected) sales and the break-even point. It tells you how much sales can drop before you start losing money. For example, if your break-even is 500 units and you sell 800, your margin of safety is 300 units (37.5%). A higher margin of safety means your business is more resilient to downturns in demand.

Break-Even Calculator - Find Your Break-Even Point

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Break-Even Calculator

Find out how many units you need to sell to cover your costs. Enter your fixed costs, variable cost per unit, and selling price to calculate your break-even point instantly.

Currency

Fixed Costs

Costs that do not change with production volume (rent, salaries, insurance, etc.)

Variable Cost per Unit

Costs that change with each unit produced (materials, packaging, direct labor, etc.)

Selling Price per Unit

Target Profit (optional)

Enter a target profit to see how many units you need to sell to reach it

Break-Even Results

Break-Even Point (Units) —

Break-Even Revenue —

Contribution Margin per Unit —

Contribution Margin Ratio —

This calculation assumes a constant selling price and variable cost per unit. Results are estimates — actual break-even may vary based on market conditions and cost structure.

Frequently Asked Questions

The break-even point is the sales volume at which total revenue equals total costs — meaning you make neither a profit nor a loss. Any sales below this point result in a loss; any sales above it generate a profit. Knowing your break-even point is essential for pricing, budgeting, and evaluating the viability of a business or product.

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