What is contribution margin?

Selling price minus variable cost per unit, so the amount each sale contributes toward fixed costs and then profit. It is the engine of the whole calculation: a higher margin means fewer units are needed to cover the same fixed costs.

Why can the price not equal the variable cost?

Because contribution margin would be zero or negative, meaning no number of sales ever covers fixed costs. The tool disables the Calculate button in that case rather than returning an infinite or negative result.

What does the margin ratio tell me?

Contribution margin as a percentage of selling price, so the share of every revenue dollar available for fixed costs and profit. It lets you compare products with very different price points on the same basis.

Does this work for a service business?

Yes, provided you define a unit. Use an average engagement, a billable day, or a subscription month as the unit, and count only the costs that genuinely vary with each additional one as the variable cost.

How do I handle multiple products?

This calculator models a single product. For a mixed range, compute a weighted average price and weighted average variable cost across your expected sales mix, and remember the answer only holds while that mix does.

No. The target profit is a pre-tax figure and no tax is applied anywhere in the calculation. If you need a specific after-tax profit, gross the target up before entering it here.

Why are the units rounded up?

Because a fraction of a unit contributes nothing toward fixed costs. The tool rounds up to the next whole unit, which is why break-even revenue can sit slightly above the exact fixed-cost figure.

What does the model leave out?

Step costs that jump at capacity limits such as a second oven or an extra hire, timing and cash flow, seasonality, and any constraint on how many units you can actually produce. It is a starting line, not a plan.

Break-Even Analysis Calculator for Units and Revenue

Break-Even Analysis Calculator for Units and RevenueThe Break-Even Analysis Calculator is a free browser-based tool that works out how many units a business must sell to cover its costs, and how much revenue that represents. The mechanism is contribution margin: every unit sold contributes its selling price minus its variable cost toward fixed costs, and break-even arrives when those contributions have covered the fixed costs entirely. Enter total fixed costs, selling price per unit, variable cost per unit, and an optional target profit, and the tool returns break-even units, break-even revenue, contribution margin per unit, and the margin ratio as a percentage of price.

What people use it for

A coffee shop testing a rent increase

An owner facing monthly rent rising from $11,000 to $12,500 wants to know how many extra cups that actually means each day. Running both fixed-cost figures against the same margin converts an abstract lease negotiation into a concrete daily sales target the whole team can see and act on.

A maker deciding whether to cut price

A candle maker considering dropping the price from $28 to $24 discovers the contribution margin falls proportionally faster than the price does, so break-even volume rises sharply. That reframes the discount as a serious volume commitment rather than a low-risk marketing experiment worth trying.

A subscription founder sizing a launch

A founder with $9,000 of monthly fixed costs and a $29 plan costing $4 to serve wants the subscriber count that makes the month work. That figure becomes the target on the wall, and every acquisition and pricing decision afterwards is measured against it rather than against revenue.

Setting a sales quota that includes profit

A manager needs the volume that not only breaks even but also delivers $30,000 of profit for the period. Entering a target profit shifts the whole calculation upward and produces a quota grounded in the actual cost structure rather than in last year figure plus an arbitrary ten percent.

How it works

Enter total fixed costs Costs that do not change with volume, such as rent, salaries, insurance, and software. Match the period you care about, since monthly fixed costs produce a monthly break-even figure.
Enter the selling price per unit The price a customer actually pays after standard discounts. For a service business, use the average price of one billable engagement, subscription month, or project as the unit.
Enter the variable cost per unit What each additional unit costs to produce or deliver, including materials, shipping, and payment fees. It must be below the selling price, or the Calculate button stays disabled entirely.
Add a target profit if you want one Optional. Any amount entered is added to fixed costs before the division, so the result becomes the volume needed to reach that profit rather than simply to break even.
Read the four result cards Break-even units, break-even revenue, contribution margin per unit, and the contribution margin ratio. Units are rounded up, since a partial unit covers nothing in practice.

Worked examples

Input: Fixed costs $50,000, price $40, variable cost $15, no target profit

Result: Contribution margin $25.00 per unit, margin ratio 62.5%, break-even 2,000 units, break-even revenue $80,000. Every unit sold past 2,000 adds a further $25 straight to profit for the period.

Input: The same business with a $30,000 target profit

Result: Units needed rise to 3,200 and revenue to $128,000. With a target entered, the units card shows the target figure rather than pure break-even, so set the target back to zero to see the 2,000-unit baseline.

Input: Coffee shop: fixed costs $12,500, price $5.50, variable cost $1.85

Result: Contribution margin $3.65, margin ratio 66.4%, break-even 3,425 cups, break-even revenue $18,837.50. Spread across a 26-day month that is roughly 132 cups a day before the shop earns anything at all.

Frequently asked questions

What is contribution margin?: Selling price minus variable cost per unit, so the amount each sale contributes toward fixed costs and then profit. It is the engine of the whole calculation: a higher margin means fewer units are needed to cover the same fixed costs.
Why can the price not equal the variable cost?: Because contribution margin would be zero or negative, meaning no number of sales ever covers fixed costs. The tool disables the Calculate button in that case rather than returning an infinite or negative result.
What does the margin ratio tell me?: Contribution margin as a percentage of selling price, so the share of every revenue dollar available for fixed costs and profit. It lets you compare products with very different price points on the same basis.
Does this work for a service business?: Yes, provided you define a unit. Use an average engagement, a billable day, or a subscription month as the unit, and count only the costs that genuinely vary with each additional one as the variable cost.
How do I handle multiple products?: This calculator models a single product. For a mixed range, compute a weighted average price and weighted average variable cost across your expected sales mix, and remember the answer only holds while that mix does.
Are taxes included?: No. The target profit is a pre-tax figure and no tax is applied anywhere in the calculation. If you need a specific after-tax profit, gross the target up before entering it here.
Why are the units rounded up?: Because a fraction of a unit contributes nothing toward fixed costs. The tool rounds up to the next whole unit, which is why break-even revenue can sit slightly above the exact fixed-cost figure.
What does the model leave out?: Step costs that jump at capacity limits such as a second oven or an extra hire, timing and cash flow, seasonality, and any constraint on how many units you can actually produce. It is a starting line, not a plan.

Tips

Classify costs carefully before entering them. Payment processing fees and shipping are variable even though they feel like overhead, and misplacing them distorts the margin more than a pricing error would.
Divide break-even units by working days to get a daily target. A team can act on 132 cups a day in a way it simply cannot act on 3,425 cups a month.
Test a price rise before a cost cut. Because price feeds contribution margin directly, a small increase usually moves break-even further than an equivalent reduction in variable cost.
Recalculate whenever fixed costs step up. Adding a salary or a lease changes the target immediately, and the old number quietly becomes reassuring rather than true.

Written by Ahsan Mahmood. Last updated 2026-07-21. This calculator runs entirely in your browser and produces estimates, not tax advice.TaxEase — Break-Even Analysis Calculator for Units and Revenue