Business & pricing
Break-even point: Definition, Formula and Example
The break-even point is the sales volume or revenue at which total revenue equals the included fixed and variable costs.
Scope: General financial concept; examples are hypothetical.
Other names and related labels: Break-even sales; Zero-profit sales volume.
How it works
Each unit’s contribution covers a share of fixed costs before profit begins. A single-product model assumes a constant selling price, variable cost per unit and fixed-cost total over the relevant activity range. Different product mixes need a consistent weighted contribution assumption.
Break-even units = fixed costs / (unit price − unit variable cost); break-even revenue = fixed costs / contribution margin ratio
The unit contribution must be positive for a finite break-even with positive fixed costs. Round units up when only whole units can be sold.
$1,000 fixed cost, $25 price and $15 variable cost
Use costs and revenue from the same operating period.
- Unit contribution: $25 − $15 = $10.
- Break-even units: $1,000/$10 = 100.
- Revenue at break-even: 100 × $25 = $2,500; variable costs are $1,500.
At 100 units, $2,500 revenue covers $1,500 variable cost and $1,000 fixed cost.
One product, all units sold, constant unit economics and fixed costs; taxes and financing excluded.
Try these example inputsBreak-even volume is not guaranteed demand
A positive gross margin does not establish that enough units can be sold. If costs step up with capacity or the price changes with quantity, recalculate rather than extending the original line indefinitely.
Explore with a calculator
- Break-Even Calculator
Find units, target-profit sales or a required selling price from explicit costs.
Sources and checks
Definition and example arithmetic checked . Sources explain the concepts; numerical examples use the assumptions stated above.
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