Work out how many units you must sell to cover your costs.
Calculate the sales volume needed to cover all costs
Break-even point is where total revenue equals total costs (fixed + variable). You need to sell this many units to start making profit.
Your break-even point is where total revenue equals total costs — the moment a business stops losing money. It is driven by contribution margin: the amount each sale contributes toward fixed costs after variable costs are paid.
Break-even units = fixed costs / (price per unit - variable cost per unit). The denominator is your contribution margin per unit.
The amount each sale contributes toward covering fixed costs, after variable costs. If you sell at $50 and each unit costs $20 to make, your contribution margin is $30.
Costs that do not change with sales volume - rent, insurance, salaries, software subscriptions. Variable costs change per unit, such as materials, packaging and payment fees.
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