Enter your fixed costs, variable cost per unit, and price per unit to find out how many units you need to sell to cover all expenses.
A candle maker pays 4,200 a month in rent, insurance and software. Wax, wick, jar, label and shipping come to 9.40 a candle. Candles sell for 26.
Break-even: 254 candles a month, or 6,604 in revenue. Candle 254 is the first one that leaves any profit behind — 16.40 of it.
The arithmetic gives 253.01 candles. Selling 253 candles contributes 253 × 16.60 = 4,199.80, which is 0.20 short of the 4,200 of fixed costs, so the unit figure is rounded up to 254. The revenue line is then calculated from that rounded count, which is why 6,604 is a little more than the fixed costs alone would require.
Break-even is a volume target, not a forecast. The useful move is to compare it to something you already know: units you sold last month, seats you can physically serve, leads your pipeline produces. If break-even is 254 and your best month ever was 90, the problem is not effort — the price or the variable cost is wrong. Divide by the days in the period to get a daily rate, which is usually easier to sanity-check than a monthly one.
Putting a cost in the wrong bucket. Your own salary, a delivery van, an annual trade-show booth — these do not scale with units, so they are fixed costs, and leaving them out makes break-even look far lower than it is. In the other direction, payment-processing fees and marketplace commissions are genuinely variable and are the ones most often forgotten, which quietly inflates the contribution margin. When you are presenting this number to a lender, list both buckets line by line alongside the result, because that is the part they will interrogate.
The same arithmetic answers a more useful question. To earn a specific profit, add it to fixed costs before dividing: (Fixed costs + Target profit) ÷ Contribution margin. In the example, wanting 2,000 of profit means (4,200 + 2,000) ÷ 16.60 = 374 candles. You can run this in the calculator by entering fixed costs plus your target profit in the fixed-costs field.
There is no universal good number — it is only meaningful against your actual capacity and demand. The comparison worth making is break-even volume against the volume you already achieve. If you break even at 60 percent of a normal month, the remaining 40 percent is profit and you have room to absorb a bad month. If break-even is above anything you have ever sold, the model does not work at that price and cost structure yet.
Because there is no answer. If each unit costs more to make than it sells for, every additional sale increases the loss, and fixed costs are never recovered at any volume. The formula would divide by a negative contribution margin and return a negative unit count, which is meaningless. Raise the price or cut the per-unit cost until the margin is positive.
No. Use the amount you keep, not the amount the customer is charged. Tax you collect and remit is not revenue. For the same reason, use the net price after discounts and coupons rather than the sticker price, or the calculator will tell you that you break even sooner than you do.
Run it on a weighted average. Work out the contribution margin of each product, weight each by its share of units sold, and add them to get a blended margin per unit — then divide total fixed costs by that. The result is a break-even in units at your current sales mix, so it moves whenever the mix moves.
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