Break-Even Point & Margin-Markup Analyzer
Find how many units you must sell each month to cover your costs, and how many to reach a profit target. See contribution margin, margin of safety and operating leverage, and convert between margin and markup so your prices really earn what you expect.
Written by Suhaib Hassan. Formulas follow standard managerial accounting. Our methodology.
It finds the contribution of each unit, divides fixed costs by it for break-even, and converts between margin and markup.
Pricing goes wrong when margin and markup are mixed up or break-even is a guess. This gets both right.
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A 40% margin needs a 66.7% markup. Pricing with a 40% markup only gives a 28.6% margin, so the gap can quietly eat your profit.
Margin and markup lookup
What each gross margin means as a markup and as a selling price on a given cost.
| Gross margin | Markup needed | Price on $50 cost | Price on $100 cost | Profit per $100 cost |
|---|
Break-even price and cost sensitivity
How the break-even volume changes if your price or variable cost moves, from your inputs above.
| Change | Price | Break-even units (price change) | Variable cost | Break-even units (cost change) |
|---|
Cost-volume-profit basics
Break-even units
Q = fixed costs ÷ (price − variable cost)Contribution margin
ratio = (price − variable cost) ÷ priceTarget profit
units = (fixed costs + target profit) ÷ contribution per unitOperating leverage is total contribution ÷ operating income. It shows how much profit changes for a 1% change in sales.
Margin, markup and break-even
Margin is profit as a share of the selling price, while markup is profit as a share of cost. The same sale gives a higher markup than margin, which is why they must not be swapped.
Break-even assumes a steady price and cost per unit. Discounts, volume pricing and step costs will move it.
Worked examples
Illustrative businesses, each checked by hand. The first is the default setup.
Break-even volume
Fixed costs $12,500, variable cost $24.50, price $65.
12,500 ÷ 40.50 = 308.64
309 units, revenue 309 × 65 = $20,085
Target profit
Same business, $5,000 profit wanted.
433 units, revenue = $28,145
Margin to markup
Cost $100 and a 40% gross margin.
profit = 66.67
markup = 66.67 ÷ 100 = 66.67%
How to find your break-even point
- Add up your fixed costs for the period, such as rent, salaries and subscriptions.
- Work out the variable cost of one unit, and its selling price.
- Divide fixed costs by the contribution per unit (price minus variable cost).
- Round up to whole units, because you cannot sell part of a unit.
If the price is at or below the variable cost, you never break even, however much you sell. Raise the price, cut variable costs, or reduce fixed costs.
By Suhaib Hassan · Reviewed 29 September 2026 · How CalculatePilot verifies formulas →
Sources
- Garrison, Noreen and Brewer, Managerial Accounting, chapter on cost-volume-profit relationships.
- Horngren, Datar and Rajan, Cost Accounting: A Managerial Emphasis.
- U.S. Small Business Administration, Calculate your startup costs and break-even guidance.
Break-even revenue from the contribution margin ratio
You can also work in dollars instead of units: break-even revenue = fixed costs ÷ contribution margin ratio. With fixed costs of $12,500, a $65 price and a $24.50 variable cost, the ratio is $40.50 ÷ $65 = 62.31%, so break-even revenue is $12,500 ÷ 0.6231 = $20,061.73. The units method rounds up to 309 whole units ($20,085), which is why the two figures differ slightly.
Break-even ROAS and ACoS for ad spend
If you sell online and run ads, break-even ROAS tells you the return on ad spend you need before an ad stops losing money. Break-even ROAS = price ÷ (price − variable costs), which is the same as 1 ÷ contribution margin. Break-even ACoS is the inverse: contribution margin ÷ price.
Selling several products, or need to take VAT, shipping and payment fees into account? Use the separate Break-Even ROAS Calculator, which works out break-even ROAS, break-even ACoS and target ROAS for each product and for the mix.
| Example | Contribution margin | Break-even ROAS | Break-even ACoS |
|---|---|---|---|
| $65 price, $24.50 costs | 62.3% | 1.60 | 62.3% |
| $30 price, $10 costs | 66.7% | 1.50 | 66.7% |
Break-even ROAS by contribution margin:
| Contribution margin | Break-even ROAS |
|---|---|
| 20% | 5.00 |
| 25% | 4.00 |
| 30% | 3.33 |
| 40% | 2.50 |
| 50% | 2.00 |
| 60% | 1.67 |
| 75% | 1.33 |
This counts only variable costs, so a campaign at break-even ROAS covers its own ad spend but contributes nothing toward fixed costs or profit. To target a profit as a share of sales, use 1 ÷ (margin − target profit %). For a 40% margin and a 10% profit target, the needed ROAS is 1 ÷ 0.30 = 3.33.
When payment fees are a percentage of the price
Card fees such as 2.9% + $0.30 are variable costs that rise with the price. On a $65 sale they are $65 × 2.9% + $0.30 = $2.19, so the variable cost becomes $24.50 + $2.19 = $26.69 and the contribution falls to $38.31. Break-even then moves from 309 to 327 units (12,500 ÷ 38.315 = 326.2, rounded up).
Break-even for a service business
Use billable hours as the unit. With $8,000 of monthly fixed costs, $15 of variable cost per hour and a $75 hourly rate, the contribution is $60 an hour, so break-even is 8,000 ÷ 60 = 133.3, or 134 billable hours a month.
How long until you reach break-even each month
Divide break-even units by your sales rate. At 309 units needed and 12 sales a day, you cover your fixed costs after 309 ÷ 12 = 25.75 days, so profit only starts in the last few days of the month. Selling 20 a day would reach it in about 15.5 days.
Margin of safety using your current sales
Margin of safety = (current sales − break-even sales) ÷ current sales. If you sell 400 units and break even at 309, the margin of safety is (400 − 309) ÷ 400 = 22.75%. Sales could fall by about a fifth before you start losing money.
Fixed, variable and mixed costs
| Type | Examples | Treat as |
|---|---|---|
| Fixed | Rent, salaries, insurance, software subscriptions | Fixed costs per month |
| Variable | Materials, packaging, shipping, card fees, sales commissions | Variable cost per unit |
| Mixed | Utilities, phone plans, delivery vehicles | Split into a fixed base and a per-unit part |
| Step | Hiring another employee or renting extra space | Recalculate when volume crosses the step |
Frequently asked questions
What is the break-even point?
It is the sales volume at which total revenue equals total costs, so profit is exactly zero. Above it you make a profit and below it you make a loss.
What is the difference between margin and markup?
Margin is profit divided by the selling price, and markup is profit divided by the cost. A product costing $100 sold at $150 has a 33.3% margin but a 50% markup.
What is contribution margin?
It is the selling price minus the variable cost of a unit. It is the amount each sale contributes toward covering fixed costs and then profit.
What is the margin of safety?
It is how far sales can fall before you hit break-even, shown here as a percentage of your target volume. A bigger cushion means lower risk.
How do I lower my break-even point?
Raise the price, reduce variable costs per unit, or cut fixed costs. The sensitivity table shows how much a 5% or 10% change in price or variable cost moves the number of units.
How do I calculate break-even revenue?
Divide your fixed costs by the contribution margin ratio, which is (price − variable cost) ÷ price. With $12,500 of fixed costs and a 62.31% ratio, break-even revenue is about $20,062.
What is break-even ROAS?
It is the return on ad spend at which an ad earns back exactly its cost: price ÷ (price − variable costs), or 1 ÷ contribution margin. A 40% margin gives a break-even ROAS of 2.50.
What is the difference between ROAS and ACoS?
ROAS is revenue divided by ad spend, and ACoS is ad spend divided by revenue, so ACoS is 1 ÷ ROAS. A break-even ROAS of 2.50 is a break-even ACoS of 40%.
How do I find the break-even point for a service business?
Use billable hours as the unit: fixed costs ÷ (hourly rate − variable cost per hour). With $8,000 fixed costs and a $60 contribution per hour, you need about 134 hours a month.
Do payment processing fees change my break-even point?
Yes. Percentage fees raise the variable cost per sale and lower the contribution, so break-even rises. Add the fee, such as 2.9% of the price plus a fixed amount, to your variable cost per unit.
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