Break-Even Calculator

What is the Break-Even Point?

The break-even point (BEP) is the level of sales at which total revenues equal total costs — meaning the business makes neither profit nor loss. It is one of the most critical metrics for any business, startup, or product launch. Understanding your break-even point tells you the minimum sales volume required to keep the business viable.

Every business has two types of costs: fixed costs (rent, salaries, insurance — costs that don't change with output) and variable costs (raw materials, direct labor, packaging — costs that scale with production). The break-even analysis helps you understand how these costs and your pricing interact.

Break-Even Formula

Break-Even Formulas

BEP (Units) = Fixed Costs / (Selling Price − Variable Cost per Unit)

Contribution Margin per Unit = Selling Price − Variable Cost per Unit
Contribution Margin Ratio = Contribution Margin / Selling Price
BEP (Revenue) = Fixed Costs / Contribution Margin Ratio
Margin of Safety = (Actual Sales − BEP Sales) / Actual Sales × 100%

Worked Examples

Example 1: Food Business (Pakistan)

You run a burger restaurant in Karachi. Monthly fixed costs: PKR 150,000 (rent, salaries, utilities). Each burger sells for PKR 500. Variable cost per burger (ingredients, packaging): PKR 200.

Contribution Margin = 500 − 200 = PKR 300 per burger
BEP (Units) = 150,000 / 300 = 500 burgers per month
BEP (Revenue) = 500 × 500 = PKR 250,000 per month

This means you must sell at least 500 burgers every month just to cover your costs. Any sale beyond 500 contributes PKR 300 to profit.

Example 2: Online Business (India)

You sell handmade jewelry online. Fixed costs: ₹30,000/month (platform fees, tools, marketing). Selling price per piece: ₹1,500. Variable cost: ₹600.

Contribution Margin = 1,500 − 600 = ₹900
BEP = 30,000 / 900 = 34 pieces per month
Contribution Margin Ratio = 900/1,500 = 60%
BEP Revenue = 30,000 / 0.60 = ₹50,000/month

How to Use Break-Even Analysis for Business Decisions

Setting Prices

If your current price gives a BEP that is too high to realistically achieve, you need to either raise prices, reduce variable costs, or reduce fixed costs. Break-even analysis shows you the minimum price at which the business is viable.

Evaluating New Products

Before launching a new product, calculate its BEP. If the market can realistically support that sales volume, proceed. If not, reconsider the pricing, cost structure, or whether to launch at all.

Planning Marketing Spend

If you increase fixed costs (e.g., spending PKR 50,000/month more on marketing), your BEP increases. The question is: will the marketing generate enough additional sales to more than offset the increased BEP? BEA helps quantify this.

Expansion Decisions

Opening a second location increases fixed costs significantly. Break-even analysis for the new location tells you how much additional revenue is needed to justify the expansion.

Limitations of Break-Even Analysis

Assumes all products are sold at the same price (not realistic for product mixes)
Assumes variable costs are truly linear (may not hold at very high or low volumes)
Ignores time value of money
Does not account for inventory changes
Fixed costs may "step" — increase suddenly at certain volumes (e.g., need to hire staff)