Short answer
Break-even units = fixed costs ÷ (price − variable cost per unit). Fixed $12,500, price $65, variable $24.50: contribution $40.50, so 12,500 ÷ 40.50 = 308.6, rounded up to 309 units ($20,085). A $5,000 profit target needs 433 units.
1. The formula
- Contribution per unit = price − variable cost per unit
- Break-even units = fixed costs ÷ contribution per unit
- Break-even revenue = break-even units × price
- Target-profit units = (fixed costs + target profit) ÷ contribution per unit
2. Worked example
Fixed costs $12,500 a month, variable cost $24.50 a unit, price $65.
| Step | Calculation | Result |
|---|---|---|
| Contribution per unit | $65 − $24.50 | $40.50 |
| Break-even units | $12,500 ÷ $40.50 = 308.6 | 309 units (round up) |
| Break-even revenue | 309 × $65 | $20,085 |
| Units for a $5,000 profit | ($12,500 + $5,000) ÷ $40.50 = 432.1 | 433 units |
| Revenue for a $5,000 profit | 433 × $65 | $28,145 |
3. Why you round up
You cannot sell part of a unit, and 308 units would leave you slightly short of covering fixed costs, so the break-even point is the next whole number.
4. What happens if price or cost moves by 10%
| Change | Contribution | Break-even units |
|---|---|---|
| Base case | $40.50 | 309 |
| Price +10% ($71.50) | $47.00 | 266 |
| Price −10% ($58.50) | $34.00 | 368 |
| Variable cost +10% ($26.95) | $38.05 | 329 |
| Variable cost −10% ($22.05) | $42.95 | 292 |
A 10% price change moves break-even more than a 10% cost change because price is the larger number in the contribution.
5. When you can never break even
If the price is at or below the variable cost, each sale loses money and no volume will cover fixed costs. Raise the price, cut variable costs, or reduce fixed costs.
You can run your own numbers in the Break-Even Calculator.
6. Frequently asked questions
What is the break-even formula?expand_more
Break-even units = fixed costs ÷ (selling price − variable cost per unit).
How do I calculate break-even revenue?expand_more
Multiply break-even units by the selling price, or divide fixed costs by the contribution margin ratio.
Why round break-even up?expand_more
Because you cannot sell a fraction of a unit, and rounding down would leave fixed costs slightly uncovered.
What should I include in fixed costs?expand_more
Costs that do not change with volume in the period, such as rent, salaries, insurance and subscriptions.