Break Even Formula
The Break-Even Formula is a vital tool for entrepreneurs to determine the minimum number of units a business must sell to cover all its costs, indicating the point where it neither makes a profit nor incurs a loss.
Bottom Line
The Break-Even Formula is a vital tool for entrepreneurs to determine the minimum number of units a business must sell to cover all its costs, indicating the point where it neither makes a profit nor incurs a loss.
Break-Even Units Calculator
Find break-even units, revenue, and target-profit volume fast.
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Formula
Copy the exact expression or work through it step by step below.
Break-Even Units = Fixed Costs / (Price Per Unit - Variable Cost Per Unit) Variables
BU
Break-Even Units
The number of units that must be sold for total revenue to exactly cover total costs. Below this count the business loses money; above it, each unit adds profit.
FC
Fixed Costs
Total fixed costs for the period in currency units (rent, salaries, software) that do not change with volume. The numerator of the break-even formula.
PU
Price Per Unit
The selling price of one unit in currency units. Must exceed variable cost per unit, or break-even is undefined.
VCU
Variable Cost Per Unit
The cost that scales with each unit produced or sold, in currency units (materials, transaction fees). Subtracted from price to give the per-unit contribution margin.
Step By Step
- 1
Set the baseline case with the real calculator inputs.
Mode = Single-SKU, Fixed Costs = $20,000, Unit Price = $150, Variable Cost / Unit = $60, Target Profit = $10,000, Planned Units = 350
- 2
Compute the contribution margin per unit by subtracting variable cost per unit from the price per unit.
Price 50 minus variable cost 20 leaves a 30 per-unit contribution margin.
- 3
Apply the formula and read the first calculator outputs, not just the headline assumption.
The calculator lands with contribution margin per unit at $90.00, contribution margin ratio at 60.0%, and break-even units at 222.22.
- 4
Re-run with a lower price or higher variable cost to see how quickly the break-even unit count rises when margins thin.
Cutting the contribution margin from 30 to 20 pushes break-even from 400 to 600 units.
Worked Example
Break Even sample case
Mode
Single-SKU
Fixed Costs
$20,000
Unit Price
$150.00
Variable Cost / Unit
$60.00
Target Profit
$10,000
Planned Units
350
Contribution margin per unit = 150 - 60 = $90, and the contribution margin ratio = 90 / 150 x 100 = 60.0%. Break-Even Units = Fixed Costs / contribution margin = 20,000 / 90 = 222.22 units.
The calculator lands with contribution margin per unit at $90.00, contribution margin ratio at 60.0%, and break-even units at 222.22.
Common Variations
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Sources & References
- Principles of Accounting, 23rd Edition — McGraw-Hill Education
- Entrepreneurship: Theory, Process, Practice — Cengage Learning
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