How to Calculate Break-Even

The formula

Contribution margin per unit = selling price − variable cost per unit. Break-even units = fixed costs ÷ contribution margin per unit. Break-even revenue = break-even units × selling price.

Contribution margin is the part of each sale left over to pay fixed costs. Once fixed costs are covered, every further unit of contribution becomes profit.

Fixed versus variable

Variable costs move with each unit sold: materials, packaging, payment fees, per-order delivery. Fixed costs do not move with volume in the short term: rent, salaries, insurance, subscriptions.

When there is no break-even point

If your selling price is equal to or below your variable cost per unit, contribution margin is zero or negative and no volume will ever cover fixed costs. Volume makes the loss larger, not smaller. The only fixes are a higher price or a lower variable cost.