The break-even point is the level of production or sales at which total revenues equal total costs, resulting in neither profit nor loss. It is a fundamental concept in cost-volume-profit (CVP) analysis used to plan pricing, budgets, and production levels.
Break-Even Units = Fixed Costs / (Price per Unit − Variable Cost per Unit)
Break-Even Revenue = Fixed Costs / Contribution Margin Ratio
Fixed Costs = costs that don't change with production volume. Price per Unit = selling price. Variable Cost per Unit = cost that varies with each unit produced. Contribution Margin Ratio = (Price − Variable Cost) / Price.
Example 1: Product sells for $50, variable cost $20 per unit, fixed costs $90,000/year
Result: Break-even = 3,000 units (or $150,000 in revenue)
Example 2: SaaS product: $99/month subscription, variable cost $15/customer/month, fixed costs $42,000/month
Result: Break-even = 500 customers ($49,500/month)
Use our free Break-Even Calculator to skip the manual math.
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