Break Even Calculator

What break-even means

The break-even point is the sales volume at which total revenue exactly covers total costs, so profit is zero. Below it you make a loss; above it every extra unit adds profit.

Costs are split into fixed costs, which do not change with output (rent, salaries, loan EMIs, software subscriptions), and variable costs, which rise with each unit sold (raw material, packaging, delivery, payment fees). The difference between the selling price and the variable cost per unit is the contribution margin: the amount each sale contributes towards fixed costs.

The formula, term by term

Break-even units = fixed costs ÷ (price per unit − variable cost per unit). Break-even revenue = break-even units × price.

Example: a small bakery has fixed costs of ₹60,000 a month, sells a cake for ₹500 and spends ₹300 on ingredients and packaging per cake. The contribution margin is ₹200, so it must sell 60,000 ÷ 200 = 300 cakes a month, or ₹1,50,000 of sales, to break even.

To reach a target profit, add it to fixed costs: for ₹20,000 profit the bakery needs (60,000 + 20,000) ÷ 200 = 400 cakes. If it actually sells 450 cakes, its margin of safety is (450 − 300) ÷ 450 ≈ 33%, meaning sales could fall by a third before it makes a loss.

Using the result well

Raising the price or cutting variable cost lowers the break-even point fastest, because both widen the contribution margin. The model assumes a constant price and cost per unit; real businesses face discounts, bulk purchase savings and step changes in fixed costs, such as hiring another employee, so recalculate whenever these change.