Business
Break-even units
Divide total fixed costs by the contribution margin earned on each unit. Round up — you cannot sell a fraction of a unit.
The Formula
Break-Even Units = Fixed Costs / (Price - Variable Cost Per Unit)
Divide total fixed costs by the contribution margin earned on each unit. Round up — you cannot sell a fraction of a unit.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| FC | Total fixed costs | currency | Overhead that does not vary with volume within the relevant range: rent, salaried staff, insurance, baseline software subscriptions. |
| P | Sale price per unit | currency | Net of discounts and returns. Use what actually lands, not the list price. |
| VC | Variable cost per unit | currency | Materials, direct labour, packaging, payment processing, shipping — anything that disappears if the unit is not sold. |
| Q(BE) | Units needed to break even | units | Below this each unit adds a loss; above it each unit adds contribution to profit. |
What Each Symbol Means
FCcurrency
Total fixed costs
Overhead that does not vary with volume within the relevant range: rent, salaried staff, insurance, baseline software subscriptions.
Pcurrency
Sale price per unit
Net of discounts and returns. Use what actually lands, not the list price.
VCcurrency
Variable cost per unit
Materials, direct labour, packaging, payment processing, shipping — anything that disappears if the unit is not sold.
Q(BE)units
Units needed to break even
Below this each unit adds a loss; above it each unit adds contribution to profit.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate the break-even point page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate The Break-Even Point, filed under Finance. Every number the guide produces comes from substituting into this one line.