Break-Even Sales and Unit Volume

Let F be fixed costs for the chosen period, p selling price per unit, and v variable cost per unit, all in the currency shown. Contribution margin per unit m = p − v; contribution ratio = m/p × 100%. Break-even units U = F/m and break-even sales R = U × p. The same period must be used for F and all sales assumptions.

Enter fixed costs 9,000, variable cost 20 per unit, and selling price 50 per unit. The margin is 30 per unit, the ratio is 60%, and break-even is 9,000/30 = 300 units or 15,000 in sales. Monetary amounts use $.

With target profit 3,000, the form displays 400 target units and 20,000 target sales. Its “safety margin” is (20,000 − 15,000)/20,000 = 25% of target sales.

Increasing price or reducing variable cost raises contribution per unit and lowers the required unit volume, if demand and fixed costs are unchanged.

Use this one-product model to test whether a planned price and cost structure can cover period fixed costs. Compare the required volume with realistic sales capacity.

If you enter a target profit T, required units = (F + T)/m and target sales = required units × p. The displayed “safety margin” is (target sales − break-even sales)/target sales × 100%; it is a gap within this target scenario, not a comparison with actual sales. T uses the same currency and period as F.

When target sales are zero, the safety percentage is undefined; the form states this instead of dividing by zero.

The model assumes one product, constant price and variable cost per unit, and fixed costs for the selected period. It excludes taxes, financing charges, capacity limits, changing sales mix, and cash-flow timing. The form rejects p ≤ v because zero or negative unit margin cannot cover positive fixed costs. Displayed whole units may be rounded to the nearest unit; if U is fractional, round up for a practical sales target. Information only; not financial or legal advice. The period selector labels the inputs; it does not convert fixed costs or prices between months, quarters, and years.

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Last reviewed: 2026-09-28.

• U.S. Small Business Administration — break-even point
• OpenStax, Managerial Accounting — break-even in units and dollars

What happens when variable cost equals or exceeds selling price?

Contribution per unit is zero or negative, so positive fixed costs cannot be recovered by selling more at those inputs. The form rejects this input.

Why might a fractional break-even volume need one more unit?

Whole products cannot usually be sold in fractions. If the exact quotient is, for example, 300.2, at least 301 whole units are needed to cover costs.