Divide your fixed costs by the contribution margin on each sale — price minus variable cost — round up to the next whole unit, and multiply back by price for revenue. At $12,000 of fixed costs, a $50 price, and a $30 variable cost, the margin is $20, break-even is 600 units and $30,000 in revenue, and a $10,000 profit target needs 1,100 units.
What counts as a fixed cost
Fixed costs are the bills that arrive whether you sell anything or not: rent, insurance, software subscriptions, base salaries, loan payments, licences. Add them up for one period — a month is the usual choice — and use that same period everywhere else on the page. One line deserves a deliberate decision: your own pay. If you count a salary for yourself inside fixed costs, break-even means the business covers everyone including you. If you leave it out, the figure you get is the point where the business stops losing money but you have not yet been paid — a break-even that pays everyone except the owner is a fiction, so most owners are better served counting their own pay in the pile and reading the answer honestly.
What counts as a variable cost
Variable costs happen only when a unit sells: the materials in the product, its packaging, a marketplace or card fee taken per sale, shipping you absorb, and direct labour paid per job. The test is simple — if sales doubled next month, would this cost roughly double? Then it belongs in the per-unit figure, divided by the units it serves. If it would stay the same, it is fixed. Some costs sit on the border: hourly help hired only for busy weeks is variable in practice; a salaried employee is fixed even though they make the product. Classify by behaviour, not by what the cost is called, because the split is what makes the margin below mean anything.
Contribution margin, in plain words
Every sale brings in the price and immediately spends its variable cost. What is left — the contribution margin — is the amount each sale contributes toward paying down the fixed pile. At a $50 price and a $30 variable cost, each sale contributes $20. Stack enough $20 contributions and the $12,000 pile is covered: that stacking count is the break-even point. The margin ratio states the same idea as a share of price — $20 ÷ $50 = 40.00% — which is useful when products sell at different prices, because a ratio travels across a product line in a way a per-unit dollar figure cannot.
Worked example — $12,000 fixed, $50 price, $30 variable cost
The calculator is pre-filled with exactly this case, plus a $10,000 target profit:
- Contribution margin: $50 − $30 = $20.00; margin ratio $20 ÷ $50 = 40.00%
- Break-even units: ceil($12,000 ÷ $20) = 600 units (exact quotient 600.00)
- Break-even revenue: 600 × $50 = $30,000.00
- Target-profit units: ceil(($12,000 + $10,000) ÷ $20) = 1,100 units; revenue 1,100 × $50 = $55,000.00
Check it by hand: at 600 units the business takes in $30,000, pays 600 × $30 = $18,000 in variable costs and $12,000 in fixed costs, and lands on exactly $0 profit. Unit 601 is the first profitable sale, adding one full $20 margin.
Why the answer rounds up
Units are whole and indivisible — a fractional unit cannot be sold — and rounding down leaves real costs unpaid. Consider $10,000 of fixed costs at a $30 margin: the exact quotient is 333.33 units. Rounding to the nearest unit gives 333, and 333 sales contribute 333 × $30 = $9,990 — $10.00 short of the fixed costs. The first count that actually covers them is the ceiling, 334 units, and this calculator always rounds up and shows the exact quotient beside the answer so the step is auditable. For the same reason, break-even revenue on this page is the ceiled units multiplied by price — 334 × $80 = $26,720.00 in that illustration at an $80 price — so the two printed figures always reconcile with each other.
Units or revenue — and what a target profit changes
The units form answers a production question: how many jobs, orders, or products must move. The revenue form answers a sales question: how much must come in the door. For a single product they are the same answer in two units. For a mixed product line, the revenue form is usually the practical one, reached through the margin ratio — though this page's revenue figure deliberately comes from its ceiled units, so a single-product reader can always multiply the printed units by the printed price and land on the printed revenue. A target profit changes only the pile: add the target to fixed costs before dividing, and the formula returns the volume at which that profit is reached instead of zero. Nothing else about the method moves.
The three levers — and the case that never breaks even
Arithmetically, break-even moves when one of three numbers moves. A higher price raises the margin on every sale, so fewer sales cover the pile. A lower variable cost does the same from the other side of the subtraction. Lower fixed costs shrink the pile itself. Those are statements about the formula, not promises about any business — each lever has its own real-world friction, and this page's job is only to show what a change would do to the threshold. The limiting case matters most: when the price is at or below the variable cost, the margin is zero or negative and no volume covers the fixed costs, because each sale contributes nothing — or loses money — before fixed costs are even counted. Selling more of a losing unit makes the loss bigger. The calculator says so in words instead of printing a negative or astronomical unit count, and the margin line still shows, because it is the number that explains why.