Break Even Calculator

The break-even point is the level of sales at which total revenue equals total costs — meaning no profit and no loss. Every unit sold beyond break-even contributes directly to profit.

The Formula:

Break-Even (units) = Fixed Costs / (Selling Price per unit − Variable Cost per unit)

Break-Even (revenue) = Fixed Costs / Contribution Margin Ratio

Where:

Contribution Margin per unit = Selling Price − Variable Cost

Contribution Margin Ratio = Contribution Margin per unit / Selling Price

Worked Example:

A candle business has:

• Fixed costs: $2,400/month (rent, insurance, equipment)
• Selling price: $25 per candle
• Variable costs: $10 per candle (wax, wicks, jars, packaging)

Contribution margin = $25 − $10 = $15 per candle

Break-even = $2,400 / $15 = 160 candles per month

Break-even revenue = 160 × $25 = $4,000/month

Margin of Safety:

If you sell 200 candles/month:

Margin of safety = 200 − 160 = 40 candles (or $1,000 above break-even)

This means sales can fall 20% before you start losing money.

Target Profit Calculation:

Units needed for target profit = (Fixed Costs + Target Profit) / Contribution Margin

To earn $1,500 profit: (2,400 + 1,500) / 15 = 260 candles

Practical Tips:

• Break-even analysis assumes a constant product mix — it changes if you sell multiple products at different margins
• Use it to evaluate pricing changes: raising price by $2 drops break-even to 137 candles
• Variable costs change with volume — revisit the calculation if you’re getting bulk material discounts