What is the difference between fixed costs and variable costs?

Fixed costs remain constant regardless of how many units are produced or sold. Examples include rent, salaries, insurance, software subscriptions and equipment depreciation. Variable costs change in direct proportion to the number of units produced. Examples include raw materials, direct labour, packaging, shipping and sales commissions per unit. The distinction is critical for break-even analysis because only fixed costs create the break-even threshold -- variable costs scale with revenue and are always covered by each unit sold.

Break-Even Calculator

Q: What is break-even point?

The break-even point is the level of sales at which total revenue equals total costs, resulting in neither profit nor loss. At this point, the business has covered all fixed costs and variable costs but has not yet generated profit. Above the break-even point, every additional unit sold generates profit equal to the contribution margin per unit. Below the break-even point, the business is operating at a loss.

Q: What is contribution margin?

Contribution margin is the amount of revenue remaining after subtracting variable costs. It represents the portion of each sale that contributes toward covering fixed costs and generating profit. Contribution margin per unit = Selling price minus variable cost per unit. Contribution margin ratio = Contribution margin per unit divided by selling price, expressed as a percentage. A higher contribution margin ratio means more of each sales pound or dollar goes toward covering fixed costs and profit.

Q: What is margin of safety?

Margin of safety is the difference between actual or expected sales and break-even sales. It shows how much sales can fall before the business starts making a loss. Margin of safety in units = Current units minus break-even units. Margin of safety percentage = (Current units minus break-even units) divided by current units, times 100. A margin of safety above 20% is generally considered healthy. A low margin of safety means the business is close to its break-even point and vulnerable to small drops in sales.

Q: What is sensitivity analysis in break-even analysis?

Sensitivity analysis in break-even analysis examines how the break-even point changes when key inputs change. For example, if the selling price drops 10%, how many more units need to be sold to break even? If variable costs increase 15%, what happens to the contribution margin and break-even point? Sensitivity analysis helps businesses understand which variables have the greatest impact on profitability and plan for different scenarios. This tool includes a sensitivity table showing break-even units at different selling price and variable cost combinations.

Q: How do I reduce my break-even point?

There are three ways to reduce the break-even point: 1) Increase selling price (raises contribution margin per unit, so fewer units are needed to cover fixed costs). 2) Reduce variable costs per unit (same effect -- raises contribution margin). 3) Reduce fixed costs (directly reduces the total fixed costs that need to be covered). In practice, increasing price may reduce volume, reducing variable costs may require supplier negotiations, and reducing fixed costs may require operational changes. The sensitivity analysis section of this calculator shows the impact of each approach.

Key features

Everything the Break-Even Calculator Does

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Break-Even Units & Revenue

Instantly calculates the exact number of units and total revenue needed to cover all fixed and variable costs with zero profit or loss.

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Contribution Margin

Shows contribution margin per unit and contribution margin ratio so you can see how much each sale contributes toward covering fixed costs.

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Margin of Safety

Calculates how far your current sales volume is above break-even in units, revenue and percentage - showing your cushion against a sales drop.

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Sensitivity Analysis

A unique matrix table showing how break-even units change across different selling prices and variable cost scenarios - absent on all competitor tools.

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Visual Break-Even Chart

A canvas-drawn chart overlays total revenue and total cost lines, clearly marking the break-even point where the two lines cross.

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Profit/Loss Table

Shows profit or loss at 8 volume levels from zero to 2x break-even, making it easy to plan sales targets and understand the cost structure.

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7 Currency Symbols

Supports USD, GBP, EUR, INR, AED, AUD and CAD. All results display in the selected currency symbol throughout the output.

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Instant Live Calculation

Results update immediately when you click Calculate. No page reload, no server round-trip. All calculations run locally in your browser.

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100% Private

No data is sent to any server. No account or login required. Your financial figures stay entirely on your device.

How to use

How to Use the Break-Even Calculator

Enter your fixed costs

Add the total fixed costs for the period you are analysing - monthly is most common. Include rent, salaries, insurance, software subscriptions and any other costs that do not change with sales volume.

Enter your variable cost per unit

Enter the cost to produce or deliver a single unit of your product or service. This includes raw materials, packaging, direct labour per unit, shipping and any other cost that increases with each unit sold.

Enter your selling price per unit

Enter the price you charge customers for each unit before tax. Make sure the selling price is higher than the variable cost per unit - if not, you cannot break even regardless of volume.

Optionally enter current units sold

Enter your current or forecast sales volume for the period. This unlocks the margin of safety calculation, which shows how many units you are above break-even and how much sales can fall before you make a loss.

Click Calculate and review results

Click the Calculate Break-Even button to see break-even units, revenue, contribution margin and margin of safety. Review the chart to visualise where your break-even point sits relative to current volume.

Use sensitivity analysis for planning

Read the sensitivity table to see how your break-even point would change if you raised or lowered your price, or if your variable costs increased. Use this to stress-test your pricing and identify the most impactful levers.

Competitor comparison

Break-Even Calculator: LazyTools vs Competitors

Most free break-even calculators are basic forms that return a single number with no chart, no sensitivity analysis and no margin of safety. LazyTools gives you everything in one screen with no login required.

Feature	LazyTools	Calculatorsoup	Omni Calculator	QuickBooks
Break-even units & revenue	Yes	Yes	Yes	Yes
Contribution margin display	Yes	Yes	Yes	No
Visual break-even chart	Yes	No	Yes	Yes
Margin of safety	Yes	No	Yes	No
Sensitivity analysis	Yes (matrix)	No	No	No
Profit/loss volume table	Yes (8 rows)	No	No	No
No login required	Yes	Yes	Yes	Account needed
Multiple currencies	Yes (7)	No	Yes	Yes

Formulas & reference

Break-Even Analysis Formulas Explained

Break-even analysis uses four core formulas. Understanding each one helps you interpret the results and identify which variables to focus on when trying to improve profitability.

Metric	Formula	What it tells you
Contribution margin per unit	Selling price - Variable cost per unit	How much each unit sold contributes toward covering fixed costs and profit
Contribution margin ratio	Contribution margin / Selling price x 100	The percentage of each sale that is contribution margin
Break-even units	Fixed costs / Contribution margin per unit	The minimum number of units to sell to cover all costs
Break-even revenue	Fixed costs / Contribution margin ratio	The minimum revenue to cover all costs (in currency)
Margin of safety (units)	Current units - Break-even units	How many units above break-even you currently are
Margin of safety %	(Current - Break-even) / Current x 100	How much sales can fall before you make a loss
Profit at volume N	(N x Selling price) - Fixed costs - (N x Variable cost)	Profit or loss at any specific sales volume

-- Example: Coffee shop break-even analysis Fixed costs: $8,000 (rent $4,000 + salaries $3,500 + other $500) Variable cost: $1.80 (coffee beans, milk, cup, lid per drink) Selling price: $4.50 (average drink price) Contribution margin: $4.50 - $1.80 = $2.70 per drink CM ratio: $2.70 / $4.50 = 60% Break-even units: $8,000 / $2.70 = 2,963 drinks/month Break-even revenue: $8,000 / 0.60 = $13,333/month

Startup break even calculator: what to include

For a startup break-even calculator, fixed costs should include all one-time and recurring costs that are not tied to individual sales: legal fees amortised over the first year, website and software setup costs, equipment depreciation, office rent and staff salaries. Variable costs should include only costs that scale with each unit of sale: materials, production labour, packaging, fulfilment and payment processing fees. Do not include costs that are fixed regardless of output in the variable cost field.

Product pricing break even: using the break even point calculator for business

The product pricing break-even approach works in reverse: instead of asking "at what volume do we break even?", you ask "at what price do we reach a target volume?". Use the sensitivity analysis table to find what selling price achieves break-even at your realistic sales forecast. If your target volume is 500 units per month and your fixed costs are $10,000, you need a contribution margin of at least $20 per unit - which constrains the minimum viable price given your variable costs.

Margin of safety calculator: interpreting the result

The margin of safety shows how resilient your business is to a sales decline. A margin of safety above 25% is generally considered healthy - it means sales would have to fall by a quarter before you start losing money. A margin of safety below 10% is concerning and suggests the business is operating close to the edge. To improve your margin of safety: increase selling price, reduce fixed costs or reduce variable costs - all three increase the contribution margin and lower the break-even point, widening the gap.

Sensitivity analysis in break-even analysis

The sensitivity analysis in this calculator is the key differentiator absent on all other free break-even tools. It shows a matrix of break-even units across a range of selling prices (from -20% to +20% of your input) and variable cost scenarios (-20% to +20%). This is critical for planning because businesses rarely have perfect cost visibility. If your supplier raises prices by 10%, or if you need to discount to win customers, the sensitivity table immediately shows the new break-even threshold without having to re-enter your figures.

Fixed cost vs variable cost break-even analysis

The distinction between fixed and variable costs is the foundation of break-even analysis. Fixed costs create the break-even hurdle - the higher your fixed costs, the more units you must sell before making any profit. Variable costs determine the contribution margin per unit - the lower your variable costs relative to price, the fewer units are needed to cover fixed costs. Businesses with high fixed costs and low variable costs (software companies, airlines, utilities) have low contribution margins at low volumes but very high profitability at high volumes. Businesses with low fixed costs and high variable costs have a low break-even point but also lower upside from scale.

FAQ

Frequently Asked Questions

What is break-even point?▼

The break-even point is the sales level where total revenue equals total costs - no profit, no loss. Above it, every additional unit sold generates profit equal to the contribution margin. Below it, the business is making a loss.

How do you calculate break-even point in units?▼

Break-even units = Fixed costs divided by contribution margin per unit. Contribution margin per unit = Selling price minus variable cost per unit. Example: Fixed costs $10,000, price $50, variable cost $30, contribution margin $20, break-even = 10,000 / 20 = 500 units.

What is contribution margin?▼

Contribution margin is the revenue remaining after subtracting variable costs. Per unit: Selling price minus variable cost. Ratio: Contribution margin divided by selling price as a percentage. A higher contribution margin ratio means more of each sale goes toward fixed costs and profit.

What is margin of safety?▼

Margin of safety is the difference between actual sales and break-even sales. It shows how much sales can fall before the business loses money. Percentage = (Current units - Break-even units) / Current units x 100. Above 20% is healthy. Below 10% is a warning sign.

What is the difference between fixed and variable costs?▼

Fixed costs remain constant regardless of sales volume: rent, salaries, insurance, software. Variable costs change with each unit sold: raw materials, packaging, direct labour, shipping per unit. Only fixed costs create the break-even hurdle. Variable costs are always covered by each sale's contribution margin.

What is sensitivity analysis in break-even analysis?▼

Sensitivity analysis shows how the break-even point changes when key inputs change - for example, if price drops 10% or variable costs rise 15%. This calculator shows a matrix of break-even units across price and variable cost scenarios, helping you plan for different scenarios and understand which variables matter most.

How do I reduce my break-even point?▼

Three ways: 1) Increase selling price (raises contribution margin, fewer units needed). 2) Reduce variable costs (same effect). 3) Reduce fixed costs (directly lowers the threshold). The sensitivity analysis table shows the impact of price and cost changes on break-even units without re-entering figures.

What is break-even revenue?▼

Break-even revenue is the total sales revenue needed to cover all costs. Calculated as break-even units x selling price, or alternatively fixed costs divided by contribution margin ratio. Useful for tracking revenue targets rather than unit targets.

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