The BEP (Break-Even Point) Calculator determines when your business revenue covers all costs.
Displays BEP in units and currency, contribution margin, CM ratio, and margin of safety. Includes a visual break-even chart and a profit table at various sales volumes.
Calculator information
📋 How to use this calculator
- Enter fixed costs per month (rent, salaried payroll, utilities baseline, depreciation) - costs that do not change with sales volume.
- Fill in the selling price per unit in dollars.
- Enter the variable cost per unit (raw materials, packaging, commissions) - costs that scale proportionally with units sold.
- Click Calculate to see the break-even point in units, in dollars, the contribution margin per unit, and the CM ratio.
- Use the target profit slider to simulate: how many units must I sell to earn $X in profit?
- Review the chart: fixed cost line, revenue line, and total cost line - the intersection is the break-even point.
- Tip: If BEP is too high, options include (1) raise the selling price, (2) lower variable costs, (3) cut fixed costs, or (4) some combination of the three.
🧮 Break-Even Point
BEP (units) = Fixed Costs / (Selling Price - Variable Cost per Unit)
- BEP (dollars) = BEP (units) x Selling Price
- Contribution Margin (CM) = Selling Price - Variable Cost per Unit
- CM Ratio = CM / Selling Price (%)
- BEP with target profit: (Fixed Costs + Target Profit) / CM per Unit
- Margin of Safety = (Actual Sales - BEP) / Actual Sales
Assumptions: selling price stays constant, variable costs are linear, all production is sold.
💡 Worked example: Coffee shop: rent $4,000/month, latte $5.50/cup, COGS $1.75/cup
Given:- Fixed costs = $4,000/month
- Selling price = $5.50/cup
- Variable cost = $1.75/cup (beans, milk, syrup, cup, lid, sleeve)
Steps:- Contribution Margin: $5.50 - $1.75 = $3.75/cup.
- CM Ratio: $3.75 / $5.50 = 68%.
- BEP units: $4,000 / $3.75 = 1,067 cups/month, about 36 cups/day.
- BEP dollars: 1,067 x $5.50 = $5,867/month.
- Target profit $3,000: ($4,000 + $3,000) / $3.75 = 1,867 cups, about 62 cups/day.
- Margin of Safety at 2,000 cups/month: (2,000 - 1,067) / 2,000 = 46.7%.
Result: You need to sell 36 cups per day to break even, 62 cups per day for a $3,000 monthly profit. The business is healthy above 1,067 cups.
❓ Frequently asked questions
What is the difference between fixed cost and variable cost?
Fixed costs do not change in the short run regardless of volume: rent, salaried payroll, insurance, equipment depreciation, software subscriptions. Variable costs change proportionally with volume: raw materials, packaging, sales commissions, per-order shipping, production-related utilities. There are also semi-variable costs (such as utilities with a base charge plus usage). Separate them correctly to calculate BEP accurately.
How do I lower my BEP?
Four main strategies: (1) Raise prices - but watch demand elasticity; A/B test first. (2) Lower variable costs - negotiate with suppliers, buy in volume, substitute materials without sacrificing quality. (3) Cut fixed costs - sublease space, automate processes, shift to contractor labor where appropriate. (4) Shift the product mix toward higher-margin items. A common target: lower BEP by 20-30 percent within 6 months after an operational review.
What is the Margin of Safety and why does it matter?
Margin of Safety is the percentage of sales above the break-even point. A 30 percent MoS means sales could drop 30 percent before the business starts losing money. A low MoS (under 10 percent) signals fragility - a small market downturn could push you into the red. Investors generally favor a MoS above 50 percent for defensive businesses. To raise MoS: lower the BEP or grow sales volume. Small businesses are typically advised to target at least 25 percent MoS to weather seasonal slow periods.
Does break-even analysis work for service businesses?
Yes, with adjustments. For services, the 'unit' might be billable hours, clients, or projects. Example consultant: fixed costs $8,000/month (office + tools), rate $200/hour, variable cost $20/hour (travel, supplies). CM = $180/hour, BEP = 45 hours/month, about 11 billable hours/week. For SaaS, use MRR (Monthly Recurring Revenue) and churn rate. Service businesses typically have a lower BEP because variable costs are small.
What are the limitations of break-even analysis?
BEP assumptions: constant selling price (no volume discounts), linear variable costs, everything produced is sold, fixed costs stay constant. Reality: there are economies of scale (variable cost falls as volume rises), promotional discounts, unsold inventory, and fixed costs can change (rent escalations). BEP is best for initial planning and single-product analysis. For multi-product analysis, use a weighted-average CM or analyze profitability per product.
📚 Sources & references
Last updated: May 11, 2026