What happens if my variable cost equals my selling price?

If the variable cost equals the selling price, the contribution margin is zero, meaning each unit contributes nothing toward fixed costs. In this case, you can never break even — you need to raise your price or lower your variable costs.

Does break-even analysis account for taxes?

Basic break-even analysis does not include taxes. For a more accurate picture, you can increase your fixed costs to include estimated tax obligations, or calculate a post-tax break-even by adjusting the contribution margin.

How can I lower my break-even point?

You can lower your break-even point by reducing fixed costs (negotiate rent, cut overhead), lowering variable costs per unit (bulk purchasing, efficient processes), or increasing your selling price.

Is break-even analysis useful for service businesses?

Yes. For service businesses, treat your hourly rate or project fee as the 'price per unit', your direct labour and material costs as variable costs, and overhead as fixed costs. The break-even tells you how many projects or billable hours you need.

Break-Even Calculator – Find Your Break-Even Point

Free break-even calculator to find how many units you need to sell to cover costs. Includes contribution margin and break-even revenue analysis.

Last updated: 2026-03-07

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Understanding Break-Even Analysis

Break-even analysis determines the point at which your total revenue equals total costs — the moment your business stops losing money and starts generating profit.

The Break-Even Formula

Break-Even Units = Fixed Costs ÷ (Price per Unit − Variable Cost per Unit). The denominator is your contribution margin — the amount each unit contributes toward covering fixed costs.

Key Concepts

Fixed Costs: Expenses that stay constant regardless of output (rent, salaries, insurance)
Variable Costs: Expenses that change with production volume (materials, shipping, commissions)
Contribution Margin: Selling price minus variable cost — the profit per unit before fixed costs
Margin Ratio: Contribution margin as a percentage of selling price

Why It Matters

Knowing your break-even point helps set pricing strategies, evaluate business viability, and determine how many units you need to sell before a new product becomes profitable.

Frequently Asked Questions

What happens if my variable cost equals my selling price?: If the variable cost equals the selling price, the contribution margin is zero, meaning each unit contributes nothing toward fixed costs. In this case, you can never break even — you need to raise your price or lower your variable costs.
Does break-even analysis account for taxes?: Basic break-even analysis does not include taxes. For a more accurate picture, you can increase your fixed costs to include estimated tax obligations, or calculate a post-tax break-even by adjusting the contribution margin.
How can I lower my break-even point?: You can lower your break-even point by reducing fixed costs (negotiate rent, cut overhead), lowering variable costs per unit (bulk purchasing, efficient processes), or increasing your selling price.
Is break-even analysis useful for service businesses?: Yes. For service businesses, treat your hourly rate or project fee as the 'price per unit', your direct labour and material costs as variable costs, and overhead as fixed costs. The break-even tells you how many projects or billable hours you need.

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