Break-Even Revenue
Break-even revenue is fixed costs divided by the contribution-margin ratio — the sales needed to cover all costs.
Formula
Variables
Example
$60,000 fixed costs, 40% margin: R_be = $150,000
How it works
Break-even revenue is the amount of sales income needed so that the money left after covering variable costs exactly pays for fixed costs, with neither profit nor loss. The contribution-margin ratio tells you what fraction of each sales dollar is available to cover fixed costs, so dividing fixed costs by that fraction gives the sales revenue required to wipe them out. In other words, it converts a cost target into the amount of revenue needed to support it.
When to use it
Use this when you know a business’s fixed costs and contribution margin ratio and want to find the sales level needed to avoid a loss. It is especially useful in pricing decisions, budgeting, break-even analysis, and sales planning.
Worked example, step by step
Fixed costs = $84,000 Contribution-margin ratio = 35% = 0.35 R_be = FC / CMR R_be = 84,000 / 0.35 R_be = 240,000 Break-even revenue = $240,000
Common mistakes to avoid
- Using the contribution margin percentage as a decimal incorrectly, such as dividing by 35 instead of 0.35
- Confusing fixed costs with total costs and putting variable costs into FC
- Using a margin percentage based on profit margin instead of contribution-margin ratio
Did You Know?
Below break-even every sale still loses money — the point marks where a business finally starts to profit.
Share this formula
More in Revenue & Sales
View allTotal Revenue
BasicTotal revenue is the selling price multiplied by the number of units sold.
Net Revenue
BasicNet revenue is gross revenue less returns, refunds and discounts — the amount actually recognised.
Average Revenue
BasicAverage revenue is total revenue divided by units sold — equal to price per unit in a single-price market.
Marginal Revenue
IntermediateMarginal revenue is the extra revenue earned from selling one additional unit.
Revenue Growth Rate
BasicThe percentage change in revenue from one period to the next.
Monthly Recurring Revenue
IntermediateMonthly recurring revenue is the number of active subscribers times average revenue per user per month.