How it works
Contribution Margin & Break-Even Formula
Contribution Margin is the portion of each sale that goes toward paying down fixed monthly overhead (rent, salaries, subscriptions) before generating positive operating profit.
- 1Calculate Unit Contribution Margin = Selling Price - Variable Cost per unit.
- 2Determine Contribution Margin Ratio = Unit Contribution / Selling Price.
- 3Divide Total Fixed Costs by Unit Contribution to get Break-Even Units.
- 4Add Target Profit to Fixed Costs to find sales volume needed for profit targets.
FAQ
Frequently asked questions
What are fixed costs vs variable costs?
Fixed costs remain constant regardless of production volume (e.g. rent, base salaries, software subscriptions). Variable costs increase directly with each unit sold (e.g. raw materials, packaging, payment processing fees).
Why does the calculator warn that break-even is impossible?
If variable cost per unit is greater than or equal to selling price, every unit sold creates an incremental loss, making it mathematically impossible to cover fixed overhead.
More free tools
See all 10 toolsDiscount Calculator
Single, stacked and fixed discounts with sales tax, to the cent.
Profit Margin Calculator
Gross margin, markup and profit per item from your real costs.
Missed Call Revenue Calculator
What unanswered calls cost you each month and year.
Invoice Generator
A clean, printable invoice with line items, tax and payment notes.
These tools do one job. Noxtill runs the whole business.
Sales, bookings, invoices, inventory, reviews and customer messages in one place, with AI that keeps it all moving.