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Break-even calculator, with the working

The break-even point is the sales volume where revenue covers all costs and profit is zero. Break-even units = fixed costs ÷ (price minus variable cost per unit). Enter your three numbers to get break-even units and revenue, units for a target profit and your margin of safety, each step written the way you'd say it in a case.

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Your numbers, break-even

The example is an invented coffee shop: $5 a cup, $1.50 of variable cost and $14,000 a month of fixed costs. It breaks even at 4,000 cups, or $20,000 of sales, a month.

Your numbers

Load a case (made-up round numbers, for illustration):

A new coffee shop: $5 a cup, $1.50 of beans, milk and cup, $14,000 a month of rent, staff and equipment.

Fixed costs, target profit and units expected all cover the same month.

Break-even cups
4,000
Break-even revenue
$20,000

Break-even at 4,000 cups a month, $20,000 of sales.

Break-even cups a month

4,000

Break-even revenue

$20,000

Contribution per cup
$3.50
Contribution margin
70%
For the target profit
6,000 cups
Margin of safety
20%
Break-even price at units expected
$4.30
Profit at units expected
$3,500

The working, the way you'd say it in a case

  1. 1

    Contribution margin

    $5 price minus $1.50 variable cost = $3.50 a cup, or 70% of the price.

  2. 2

    Break-even volume

    Each cup contributes $3.50 toward $14,000 of fixed costs a month, so $14,000 ÷ $3.50 = 4,000 cups a month.

  3. 3

    Break-even revenue

    $14,000 ÷ 70% = $20,000 of sales a month. This is the version to use when a business sells many items at different prices.

  4. 4

    Target profit

    To make $7,000 a month, treat the profit as one more fixed cost: ($14,000 + $7,000) ÷ $3.50 = 6,000 cups, about $30,000 of sales.

  5. 5

    Margin of safety

    At 5,000 cups a month, sales sit 1,000 cups above break-even. 1,000 ÷ 5,000 = 20%, so sales could fall about that much before it loses money. Profit at 5,000 is 5,000 × $3.50 minus $14,000 = $3,500.

  6. 6

    Break-even price

    If 5,000 cups is the volume, the lowest price that covers all costs is $1.50 + $14,000 ÷ 5,000 = $4.30 a cup, $0.70 below today's price.

  7. 7

    Say it out loud

    "We need about 4,000 cups a month, or $20,000 of sales, to break even. We expect 5,000, so there is a 20% cushion. Next I'd check how sure that forecast is."

In a case interview

How to use break-even in a case

The math takes seconds. The setup and what you say next are what the interviewer listens for.

  1. 1

    When it comes up

    Any time a client weighs a new store, product, line or price. The interviewer gives you a price, a cost per unit and some fixed costs, and the real question is whether the volume you need is realistic.

  2. 2

    How to set it up

    Split costs into fixed and variable first. Work out what one unit contributes, then divide the fixed costs by it. For the coffee shop example: $5 minus $1.50 is $3.50 a cup, and $14,000 ÷ $3.50 is 4,000 cups a month.

  3. 3

    How to say the answer

    Lead with the number and what it means, then test it: "We need 4,000 cups a month to break even, about 130 a day. We expect 5,000, a 20% cushion, so next I'd check how sure that forecast is."

Common traps

Three ways to get it wrong, and the fix

Most break-even mistakes in a case come before the division.

  1. 1

    Mixing months and years

    Fixed costs are often given a year and volume a day or a month. Put everything on the same period before you divide. $168,000 a year of fixed costs is $14,000 a month.

  2. 2

    Counting sunk costs

    Money already spent and not coming back doesn't change the decision. Leave it out of the fixed costs. A one-off investment you have not made yet gets a payback period instead: the investment ÷ yearly profit.

  3. 3

    Rounding down

    2,812.5 subscribers means 2,813. At 2,812 the business still loses a little. Round break-even volume up, and say the rounded number out loud.

Keep going

Work the examples, then say it out loud

Practice harder break-even problems, drill the math under a timer, or run a full case with the AI interviewer.

FAQ's

Frequently Asked Questions

Everything you need to know about Soreno, answered in one place.

Break-even units = fixed costs ÷ (price per unit minus variable cost per unit). The bottom of that fraction is the contribution margin per unit. Break-even revenue = fixed costs ÷ contribution margin ratio, where the ratio is the contribution margin divided by the price.
What each unit sold leaves over after its own variable costs, to pay the fixed costs and then add profit. A $5 coffee with $1.50 of beans, milk and cup has a $3.50 contribution margin, which is 70% of the price.
Then the business never breaks even. Every unit sold loses money before fixed costs are counted, so selling more makes the loss bigger. In a case, say that first and move to price or variable cost, not volume.
Treat the profit as one more fixed cost. Units = (fixed costs + target profit) ÷ contribution margin per unit. For the coffee shop, ($14,000 + $7,000) ÷ $3.50 = 6,000 cups a month.
How far sales can fall before the business loses money. Margin of safety = (expected units minus break-even units) ÷ expected units. At 5,000 cups a month against 4,000 to break even, it is 1,000 ÷ 5,000 = 20%.
The lowest price that covers all costs at a given volume: variable cost per unit + fixed costs ÷ units expected. At 5,000 cups a month, the coffee shop breaks even at $1.50 + $14,000 ÷ 5,000 = $4.30 a cup. Add units expected and the calculator shows it.
Use a weighted-average contribution margin. Multiply each product's contribution margin by its share of units sold, add them up, and divide fixed costs by that average. The answer is total units in the same mix, so if the mix shifts toward low-margin products, break-even goes up.
That is a payback question, not a break-even volume. Divide the one-off investment by the profit it earns each month or year. A $60,000 fit-out at $3,500 of monthly profit pays back in about 17 months. If the profit takes time to ramp up, add up the months until the total covers the investment.
Fixed costs stay the same whatever the volume over the period you are looking at: rent, salaries, insurance, equipment leases. Variable costs rise with each unit: materials, packaging, payment fees, shipping. If the case doesn't say, ask, and say which way you are treating any cost you are unsure of.
Often as one step inside a profitability, new product or market entry case: should the client open the store, launch the product or cut the price. The division takes seconds. What interviewers listen for is a clean split of fixed and variable costs, the same period throughout, and a check of whether the break-even volume is realistic.
No. The calculator runs in your browser. Your numbers are not stored or sent anywhere, and you do not need an account.

The calculator and the case scenarios are ours. Every business is invented and the numbers are round, for illustration. The formulas are the standard cost-volume-profit ones taught in any managerial accounting course.

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