AccountantBreak-Even Planner
Identify how many units or service packages you need to sell each month to cover your operating expenses.
Planner Inputs
Break-Even Target
Crossover Point (Revenue vs. Total Costs)
How to Compute Break-Even Points
The break-even point is the level of operations at which a business makes exactly zero profit—meaning its total sales revenues exactly equal its total expenses. Calculating this figure is crucial for pricing products, estimating sales quotas, and assessing risk before investing in capital.
The Formulas
The break-even metrics are derived using these standard accounting calculations:
Contribution Margin Ratio = Contribution Margin / Price per Unit
Break-Even (Units) = Fixed Costs / Contribution Margin
Break-Even (Revenue) = Fixed Costs / Contribution Margin Ratio
Where:
Fixed Costs are expenses that stay constant regardless of sales levels (e.g. office rent, basic salaries, server subscriptions).
Variable Costs are expenses that scale directly with unit volume (e.g. material raw goods, shipping rates, transaction merchant fees).
Worked Example
Assume you operate a consulting firm with these parameters:
- Fixed costs: Rent & software = $3,000/month
- Consulting Price: $200 per hour
- Variable cost: Partner bonuses/taxes = $50 per hour
- Contribution margin: $200 − $50 = $150/hr
- Break-Even Volume: $3,000 / $150 = 20 Hours of billing per month
- Break-Even Revenue: 20 × $200 = $4,000/month
Assumptions & Limitations
This analysis assumes that price and variable unit costs remain linear at all scale thresholds (ignoring bulk purchase discounts or economy of scale). It assumes all units produced are sold immediately and fixed expenses do not change.