Reference and guidance
Data Source and Methodology
Authoritative Source: U.S. Small Business Administration (SBA) — “Calculate your break-even point” (accessed 2025). Direct link: sba.gov/business-guide/.../break-even-point/calculate.
Tutti i calcoli si basano rigorosamente sulle formule e sui dati forniti da questa fonte.
The Formula Explained
Break-even in units:
$$Q_{be} = \\frac{FC}{P - V}$$
Break-even in sales revenue:
$$R_{be} = Q_{be}\\times P = \\frac{FC}{1 - \\tfrac{V}{P}}$$
Contribution margin:
$$CM_u = P - V, \\quad CMR = \\frac{P - V}{P}$$
Units to achieve a target profit (TP):
$$Q_{tp} = \\frac{FC + TP}{P - V}$$
Projected profit at expected units (Q):
$$\\text{Profit} = Q\\,(P - V) - FC$$
Margin of safety (MOS):
$$MOS = \\frac{\\text{Expected Sales} - R_{be}}{\\text{Expected Sales}}$$
Glossary of Variables
- Fixed Costs (FC): Costs that remain constant regardless of output (e.g., rent, salaries).
- Selling Price per Unit (P): Revenue received per unit sold.
- Variable Cost per Unit (V): Cost that varies with each unit produced or sold.
- Contribution Margin per Unit (CMu): P − V; amount contributing to cover FC and profit.
- Contribution Margin Ratio (CMR): (P − V) / P; the contribution margin as a percentage of price.
- Break-even Units (Qbe): Units required to cover all costs (profit = 0).
- Break-even Sales (Rbe): Sales revenue at the break-even point.
- Target Profit (TP): Desired operating profit before taxes.
- Units for Target Profit (Qtp): Units needed to reach TP.
- Margin of Safety (MOS): How far expected sales exceed break-even sales, as an absolute value or percentage.
How It Works: A Step-by-Step Example
Assume the following:
- Fixed Costs (FC) = $50,000
- Selling Price per Unit (P) = $40
- Variable Cost per Unit (V) = $22
Compute the contribution margin per unit: CMu = P − V = $40 − $22 = $18.
Break-even units:
Qbe = FC / CMu = 50,000 / 18 = 2,777.78 units → round up to 2,778 units.
Break-even sales revenue:
Rbe = Qbe × P = 2,777.78 × $40 = $111,111.20.
If you set a target profit of $10,000, required units are Qtp = (50,000 + 10,000) / 18 = 3,333.33 → 3,334 units.
Frequently Asked Questions (FAQ)
Is break-even the same as payback?
No. Break-even focuses on covering operating costs with sales; payback measures the time to recover an initial investment from cash inflows.
Should I round break-even units?
In practice, yes—round up to the next whole unit because selling a fraction of a unit is not feasible.
Does this calculator include taxes or discounts?
No. Enter prices and costs net of taxes or discounts. If you offer discounts, adjust the selling price accordingly.
Can I use it for services?
Yes. Treat “unit” as a billable hour or service package. Variable cost per unit equals the incremental cost of delivering one unit of service.
What happens if I enter zero price?
The tool will flag an error because contribution margin becomes undefined or negative, and break-even cannot be computed.
How accurate are the results?
Results are computed with double-precision arithmetic and formatted to two decimals for currency. The underlying model assumes linear costs and prices.