What is the contribution margin?

It's the selling price minus the variable cost per unit — the part of each sale that helps cover fixed costs, and then profit.

How does raising my price affect break-even?

A higher price widens the margin per unit, so you break even on fewer sales — as long as the higher price doesn't cut demand too much.

What is the margin of safety?

It's how far your current sales are above the break-even point — a bigger cushion means more room to absorb a downturn before a loss.

How to Calculate Your Break-Even Point

Published 10/13/2025 · 3 min read · Business tools

Camille Laurent — Finance writer at Allin

Tax · Personal finance

Checked against 2 sources

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In short

Your break-even point is the sales level where total revenue equals total costs — no profit, no loss. In units, it's fixed costs ÷ (price − variable cost per unit). With $10,000 fixed costs, a $50 price and $20 variable cost, you break even at 10,000 ÷ 30 = 334 units, or $16,700 in revenue. Every sale beyond that is profit.

Your break-even point is where revenue equals costs. Here's how to find it in units and revenue, and how to use it to make pricing decisions.

Fixed vs variable costs

Fixed costs stay the same whether you sell one unit or a thousand — rent, salaries, software, insurance. Variable costs rise with each sale — materials, packaging, shipping, payment fees. Splitting your costs into these two buckets is the first step, because break-even depends entirely on how they behave with volume.

The contribution margin

Subtract the variable cost from the price and you get the contribution margin — the part of each sale left over to cover fixed costs and, eventually, profit. At a $50 price with $20 variable cost, each unit contributes $30. This single number is the engine of break-even: the more each sale contributes, the fewer you need.

Break-even in units and revenue

Divide fixed costs by the contribution margin for the units you must sell to break even: $10,000 ÷ $30 = 334 units (rounding up, since you can't sell a fraction). Multiply by the price for the revenue figure: 334 × $50 = $16,700. Below that you make a loss; above it, each extra unit adds its full $30 margin as profit.

Using it to make decisions

Break-even turns 'what if' into numbers. Raise the price and the wider margin lowers the units you need; cut a variable cost and the same happens. Take on a new fixed cost, like a hire, and break-even rises — so you can see how many extra sales it demands before it pays off. The gap between your real sales and break-even is your margin of safety.

Worked with our own calculator

Break-even calculator

Given

Fixed costs: $20,000.00
Unit price: $100.00
Unit cost: $40.00

Result

Break-even units: 334
Break-even revenue: $33,400.00

These figures are produced by the calculator below, not typed in by hand — they are recomputed whenever the tool changes.

Run it on your own figures →

Frequently asked questions

What is the contribution margin?: It's the selling price minus the variable cost per unit — the part of each sale that helps cover fixed costs, and then profit.
How does raising my price affect break-even?: A higher price widens the margin per unit, so you break even on fewer sales — as long as the higher price doesn't cut demand too much.
What is the margin of safety?: It's how far your current sales are above the break-even point — a bigger cushion means more room to absorb a downturn before a loss.

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ComparisonMarkup vs Margin: What's the Difference?Markup and margin both describe profit on a sale, but from different bases. Confusing them costs money — here's how each works and how to convert.How-toWhat Is ROI and How Do You Calculate It?ROI measures your gain relative to what you invested, as a percentage. Here's the formula, a worked example, and what ROI leaves out.How-toHow to Find Your Break-Even Point (With the Formula)Learn the break-even formula — fixed costs divided by contribution margin — and work out exactly how many units you must sell before you start making a profit.ExplainerContribution Margin, and the Break-Even That Actually MattersGross margin nets off cost of goods sold; contribution margin nets off only the costs that vary with the unit. The gap decides your break-even, your operating leverage, and how much extra volume a price cut really needs.How-toHow to Price a Product: Cost-Plus, Markup vs Margin, and Value-BasedA practical guide to pricing: work out your unit cost, apply cost-plus pricing, understand markup versus margin, and know when to price on value instead.ComparisonGross Margin vs Markup: The Confusion That Costs Real MoneyMargin is measured on the selling price, markup on the cost. They describe the same profit from opposite ends, they are never equal, and reading one as the other quietly removes a large slice of your gross profit.

Sources

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