Break-Even (Units)

This formula finds the sales volume needed so total revenue exactly matches total cost. The denominator, Price - Variable Cost, is the contribution margin per unit: each unit sold helps pay down fixed costs after covering its own variable cost. Once the accumulated contribution equals the fixed costs, the business has broken even and profit is zero.

Use this when you need to know how many units must be sold before a product, service, or project starts making profit. It is especially useful in pricing decisions, cost planning, and comparing different product lines or production methods.

• Using total revenue instead of contribution margin in the denominator
• Forgetting to subtract variable cost from price before dividing
• Mixing up units and dollars, or treating fixed costs as if they change with each unit sold