Break-Even Calculator

Contribution Margin

CM = selling_price − variable_cost

= $75.00 − $25.00

= $50.00/unit (66.7% CM ratio)

Every unit sold contributes $50.00 toward covering your $8,000/mo fixed costs — and then profit. This is the single most important number in your cost structure: it determines how many units you must sell to cover overhead, and how fast profits accumulate above that threshold.

Contribution margin — managerial accounting (Horngren, Datar & Rajan, Cost Accounting)

Contribution Margin Ratio

CM% = CM / selling_price × 100

= $50.00 / $75.00 × 100

= 66.7% of each revenue dollar is contribution

For every $1 of revenue, 0.667 cents go toward fixed costs and profit — the rest covers variable costs. A CM ratio above 60% is high (software, consulting); below 30% is common in manufacturing and retail where materials dominate.

CM ratio = CM / Revenue — standard P&L analysis

Variable Cost Ratio

VCR = variable_cost / selling_price × 100

= $25.00 / $75.00 × 100

= 33.3% of revenue is variable cost

CM ratio + VCR = 100% by definition. Your 33.3% variable cost ratio means 33.3 cents of every revenue dollar go directly to producing/delivering the unit. High VCR businesses need more volume; low VCR businesses have more pricing flexibility.

Break-Even Units

BE_units = fixed_costs / contribution_margin

= $8,000 / $50.00

= 160.0 units/month

Below 160.0 units you lose money. Each unit below break-even costs you $50.00 in un-recovered fixed costs. Each unit above break-even generates $50.00 in net profit.

Break-even units = Fixed costs / CM — standard CVP analysis

Break-Even Revenue

BE_revenue = BE_units × selling_price

= 160.0 × $75.00

= $12,000

You need $12,000/month in revenue before making a dollar of profit. Equivalently: BE_revenue = fixed_costs / CM_ratio = $8,000 / 0.6667 = $12,000.

Fixed cost per break-even unit

fixed_per_unit = fixed_costs / BE_units

= $8,000 / 160.0

= $50.00/unit in fixed overhead

At break-even, your total cost per unit is $75.00 ($25.00 variable + $50.00 fixed). Once past break-even, additional units cost only $25.00 each — fixed overhead is already paid.

Operating leverage at break-even

op_leverage = fixed_costs / (fixed_costs + variable_costs_at_BE)

= $8,000 / ($8,000 + $4,000)

= 66.7% of total costs are fixed at break-even

High operating leverage (high fixed-cost %) means profits accelerate above break-even — but so do losses below it. A 66.7% fixed cost structure means you need reliable volume to cover overhead. Service businesses often run 60–80% fixed; manufacturing runs 30–50%.

Operating leverage — Brealey, Myers & Allen, Principles of Corporate Finance

Profit at 2× break-even volume

profit_2x = (2 × BE_units × CM) − fixed_costs

= (2 × 160.0 × $50.00) − $8,000

= $8,000/month profit

If you double your break-even volume to 320.0 units, your profit jumps to $8,000/mo — because fixed costs are already covered. This demonstrates operating leverage: doubling volume from break-even doesn't double revenue, but it turns zero profit into $8,000.

Price sensitivity: ±10% on break-even units

BE_±10% = fixed_costs / (price_±10% − variable_cost)

−10%: $67.50 price → CM $42.50 · +10%: $82.50 price → CM $57.50

= −10% price: 188.2 units · +10% price: 139.1 units

A 10% price cut increases your break-even by 28.2 units. A 10% price increase drops it by 20.9 units. Pricing decisions have an outsized impact on break-even — a small price increase that customers accept is often worth more than aggressive cost-cutting.