Break-even Calculator

What is Break-even Analysis?

Break-even analysis is a financial calculation that determines the point at which total revenue equals total costs. At the break-even point, a business neither makes a profit nor incurs a loss. It is one of the most important tools for business planning, pricing strategy and financial decision-making. Understanding your break-even point helps you set realistic sales targets and evaluate the viability of a product or business idea.

How to Use This Calculator

Enter your total fixed costs (rent, salaries, insurance, etc.), the variable cost per unit (raw materials, packaging, shipping per unit), and the selling price per unit. The calculator will determine:

• Break-even Units: The number of units you must sell to cover all costs.
• Break-even Revenue: The total revenue needed to break even.
• Contribution Margin Per Unit: Revenue minus variable cost per unit.
• Contribution Margin Ratio: Contribution margin as a percentage of selling price.

Formula

The break-even formulas are:

Break-even Units = Fixed Costs / (Selling Price - Variable Cost Per Unit)

Break-even Revenue = Break-even Units x Selling Price

Contribution Margin = Selling Price - Variable Cost Per Unit

Contribution Margin Ratio = (Contribution Margin / Selling Price) x 100

For example, if your fixed costs are ₹5,00,000, variable cost per unit is ₹200, and selling price is ₹500, then contribution margin = ₹300 and break-even units = 5,00,000 / 300 = 1,667 units.

Frequently Asked Questions

What are fixed costs?

Fixed costs are expenses that remain the same regardless of how many units you produce or sell. Examples include rent, salaries, insurance premiums, loan payments and depreciation. These costs must be paid even if you sell zero units.

What are variable costs?

Variable costs change in proportion to the number of units produced. Examples include raw materials, packaging, shipping costs per unit, sales commissions and direct labour costs tied to production.

How can I lower my break-even point?

You can lower the break-even point by reducing fixed costs, reducing variable costs per unit, or increasing the selling price. Any combination of these will reduce the number of units needed to break even.