How the Break-Even Point Is Calculated
Break-even units = Fixed Costs ÷ (Price − Variable Cost per unit). The denominator is your contribution margin: what every sale contributes toward rent, salaries and other fixed costs. Until cumulative contribution covers fixed costs, you lose money; after it, each unit's margin is pure profit.
Example: ₹50,000 monthly fixed costs, ₹500 price, ₹300 variable cost → margin ₹200/unit → break-even at 250 units or ₹1,25,000 revenue. Want ₹40,000 profit? (50,000 + 40,000) ÷ 200 = 450 units.
Two levers move the break-even down: raising price (if the market allows) or cutting variable cost. Cutting fixed costs helps linearly — every ₹200 of fixed cost removed is one fewer unit you must sell.
Pricing your product? Check margins with the Percentage Calculator, model a sale with the Discount Calculator, and add tax with the GST Calculator.
Three Worked Scenarios
| Business | Fixed / month | Price | Variable | Break-even |
|---|
| Coffee cart | ₹40,000 | ₹150/cup | ₹50/cup | 400 cups (≈14/day) |
| Online store | ₹25,000 | ₹999/item | ₹650/item | 72 orders |
| Freelancer | ₹30,000 | ₹1,500/hr | ₹100/hr | ≈22 billable hours |
Also track your margin of safety: (current sales − break-even sales) ÷ current sales. Selling 400 units against a 250-unit break-even leaves a 37.5% cushion before losses begin.
Frequently Asked Questions
How do you calculate the break-even point?
Fixed Costs ÷ (Price − Variable Cost). ₹50,000 ÷ (₹500 − ₹300) = 250 units, or ₹1,25,000 revenue.
What is contribution margin?
Price minus variable cost per unit — what each sale contributes to fixed costs, then profit. ₹500 − ₹300 = ₹200 (40% ratio).
How many units for a profit target?
(Fixed Costs + Target Profit) ÷ contribution margin. Enter your target above — the answer updates live.
What are fixed vs variable costs?
Fixed: rent, salaries, subscriptions — unchanged by volume. Variable: materials, shipping, gateway fees — scale per unit.
What is margin of safety?
(Current sales − break-even sales) ÷ current sales. Selling 400 units with a 250-unit break-even = 37.5% cushion before losses.
Does break-even analysis work for services?
Yes — use one billable hour or project as the unit. ₹30,000 fixed ÷ (₹1,500 − ₹100) margin ≈ 22 billable hours/month to break even.