# Break-Even Point Calculator | Aalekh > Compute contribution per unit and margin, break-even units and revenue, the volume needed for a target profit, and the margin of safety at your expected sales. Canonical URL: https://www.aalekh.ai/calculators/break-even [All calculators](/calculators) For Chartered AccountantsRates reviewed September 2026 # Break-Even Calculator: Contribution, Break-Even Point and Margin of Safety Break-even analysis answers the question a promoter and a banker both ask first: how much does this business have to sell before it stops losing money. The answer comes from splitting costs into the variable part, which moves with every unit sold, and the fixed part, which does not. Each unit sold contributes its selling price less its variable cost towards the fixed costs, and the break-even point is the volume at which those contributions have covered the fixed costs exactly. The definitions are the ones in the ICAI Cost and Management Accounting study material on marginal costing. Contribution per unit is selling price less variable cost per unit. The contribution margin, or profit-volume ratio, is contribution as a percentage of selling price. Break-even units are fixed costs divided by contribution per unit, and break-even revenue is fixed costs divided by the contribution margin. Adding a target profit to the fixed costs gives the volume needed to earn it, and the margin of safety is how far expected sales sit above break-even. Bank project reports carry a break-even chart because it shows how much room the projections have. A margin of safety of 30 or 40 percent means sales can fall by that much before the business loses money; a margin of 5 percent means the projections are one bad quarter from a loss. There is no prescribed minimum, and any comfort level a bank applies is its own convention, but a thin margin will be questioned at the sanction stage whatever the NPV says. ## Break-Even Calculator Selling price per unit ₹ Variable cost per unit Materials, direct labour and every other cost incurred only when a unit is made or sold. ₹ Fixed costs for the period Rent, salaries, depreciation, interest and other costs that do not move with volume. ₹ Target profit Optional. Leave at nil to see break-even alone. ₹ Expected sales volume in units The projected volume the margin of safety is measured against. Break-even point 6,000 units revenue of ₹30,00,000 at ₹500 a unit Contribution per unit₹500 less ₹300 ₹200 Contribution margin (P/V ratio)contribution as a share of the selling price 40% Break-even units₹12,00,000 ÷ ₹200 6,000 units Break-even revenue6,000 units at ₹500, or fixed costs ÷ 40% ₹30,00,000 Units for the target profit(₹12,00,000 + ₹6,00,000) ÷ ₹200, revenue of ₹45,00,000 9,000 units Margin of safety at expected volume4,000 units or ₹20,00,000 above break-even 40% Profit at expected volume10,000 units × ₹200 less fixed costs of ₹12,00,000, on revenue of ₹50,00,000 ₹8,00,000 Degree of operating leveragecontribution ₹20,00,000 over profit ₹8,00,000 2.50 - The analysis assumes one product, a constant price and variable cost per unit, and fixed costs that hold across the range. For several products use a weighted average contribution based on the sales mix. - There is no prescribed margin of safety. Any comfort level a bank applies is its own convention, and a credit officer will usually recompute the margin on a lower sales figure. ## The formula Contribution per unit = Selling price - Variable cost; Contribution margin = Contribution ÷ Selling price; Break-even units = Fixed costs ÷ Contribution per unit; Break-even revenue = Fixed costs ÷ Contribution margin; Units for target profit = (Fixed costs + Target profit) ÷ Contribution per unit; Margin of safety = (Expected sales - Break-even sales) ÷ Expected sales Variable cost per unit Materials, direct labour paid per unit and any other cost that is incurred only when a unit is made or sold. Fixed costs Rent, salaries, depreciation, interest and every other cost for the period that does not change with volume. Contribution margin The share of each rupee of sales left after variable costs, also called the profit-volume or P/V ratio. Margin of safety The gap between expected sales and break-even sales, expressed as a percentage of expected sales. Degree of operating leverage Contribution divided by profit at the expected volume, being the percentage change in profit for each one percent change in sales. The analysis assumes a single product, a constant selling price and variable cost per unit, and fixed costs that hold across the range of volumes considered. For several products, use a weighted average contribution per unit based on the sales mix, and remember that fixed costs usually step up beyond a certain volume. ## How to calculate it 1. 1 ### Separate the costs into fixed and variable Go through the cost sheet line by line. Materials, packing, freight out and piece-rate labour are variable. Rent, salaries, depreciation, insurance and interest are fixed for the period. Power and maintenance are usually semi-variable, so split them into a standing charge and a per-unit element rather than putting the whole amount on one side. 2. 2 ### Compute the contribution per unit and the margin Subtract the variable cost per unit from the selling price per unit. That is the contribution each unit makes towards fixed costs and profit. Divide it by the selling price to get the contribution margin as a percentage. If the contribution is nil or negative, every additional unit sold loses money and no volume will break even, so the price or the variable cost has to change first. 3. 3 ### Find the break-even point in units and in revenue Divide the fixed costs by the contribution per unit to get break-even units, and multiply by the selling price, or divide fixed costs by the contribution margin, to get break-even revenue. The two are the same point expressed differently, and a report should show both because the banker thinks in revenue and the plant manager thinks in units. 4. 4 ### Add the target profit Treat the profit the promoter wants as if it were another fixed cost. Fixed costs plus target profit, divided by the contribution per unit, gives the volume that earns it. This is the figure to test the sales projections against, because a projection below it means the plan does not deliver the return the promoter is counting on even if it clears break-even. 5. 5 ### Measure the margin of safety at the expected volume Subtract break-even sales from the expected sales and divide by the expected sales. The result is the percentage by which sales can fall before the business makes a loss. Pair it with the degree of operating leverage, which shows how sharply profit moves with each percent of sales, so the reader can see both how far the cushion is and how fast it erodes. ## How each figure responds to a change in the inputs How each figure responds to a change in the inputs Change Contribution per unit Break-even point Margin of safety Selling price rises Rises Falls Widens Variable cost per unit rises Falls Rises Narrows Fixed costs rise Unchanged Rises Narrows Expected volume rises Unchanged Unchanged Widens Price falls below variable cost Negative Does not exist Not meaningful ## Worked example Selling price per unit ₹500 Variable cost per unit ₹300 Fixed costs for the year ₹12,00,000 Target profit ₹6,00,000 Expected sales volume 10,000 units - Contribution per unit = ₹500 - ₹300 = ₹200, and the contribution margin = ₹200 ÷ ₹500 = 40% - Break-even units = ₹12,00,000 ÷ ₹200 = 6,000 units - Break-even revenue = 6,000 × ₹500 = ₹30,00,000, or ₹12,00,000 ÷ 40% - Units for a target profit of ₹6,00,000 = (₹12,00,000 + ₹6,00,000) ÷ ₹200 = 9,000 units - Margin of safety at 10,000 units = (10,000 - 6,000) ÷ 10,000 = 40%, or ₹20,00,000 of revenue - Profit at 10,000 units = 10,000 × ₹200 - ₹12,00,000 = ₹8,00,000, and operating leverage = ₹20,00,000 ÷ ₹8,00,000 = 2.50 Break-even at 6,000 units or ₹30,00,000 of revenue, 9,000 units for the target profit, and a margin of safety of 40% at 10,000 units ## Frequently asked questions What is contribution and why does it matter more than profit per unit? Contribution is the selling price of a unit less its variable cost, so it is what each sale adds towards covering fixed costs and then towards profit. Profit per unit depends on how the fixed costs are spread over the volume, which changes every time the volume does, so it cannot be used to predict what happens at a different level of sales. Contribution per unit is constant across volumes, which is what makes break-even arithmetic possible. How is the break-even point calculated in units and in rupees? In units it is fixed costs divided by contribution per unit: on fixed costs of ₹12,00,000 and a contribution of ₹200 per unit, 6,000 units. In rupees it is fixed costs divided by the contribution margin: ₹12,00,000 divided by 40 percent is ₹30,00,000, which is also 6,000 units at ₹500 each. The two are the same point, and a report should show both. What happens if the selling price is below the variable cost? Then the contribution per unit is negative, every unit sold loses money before any fixed cost is considered, and there is no volume at which the business breaks even. The calculator reports that rather than a number, because dividing fixed costs by a negative contribution gives a figure with no meaning. The remedy is a higher price, a lower variable cost or a different product, not a larger volume. How do I find the sales needed for a target profit? Add the target profit to the fixed costs and divide by the contribution per unit. The profit is treated as one more amount the contributions have to cover, so on fixed costs of ₹12,00,000, a target of ₹6,00,000 and a contribution of ₹200 a unit, the volume is 9,000 units. Multiply by the selling price for the revenue equivalent. If the target is after tax, gross it up at the applicable rate before adding it to the fixed costs. What is a good margin of safety for a bank project report? There is no prescribed figure, and any level a bank applies is its own convention. In practice a margin of safety above about 30 percent reads as comfortable, between 15 and 30 percent invites a question about the sales projections, and below 15 percent means one weak quarter puts the business into loss. The margin is measured on the projected volume, so an optimistic projection flatters it, and a credit officer will usually recompute it on a sales figure ten or twenty percent lower. Does break-even analysis work for a business with several products? Yes, provided the sales mix is stable. Compute a weighted average contribution per unit, or a weighted contribution margin, using the expected proportions of each product, and apply the same formulae. The break-even point then holds only for that mix: if the business sells more of the low-contribution product than planned, the break-even volume rises. A report for a multi-product business should show the mix it assumed alongside the break-even figure. Should interest and depreciation be included in fixed costs? For the accounting break-even that a project report normally shows, yes. Both are period costs that do not vary with volume, so they belong in fixed costs, and the resulting break-even is the volume at which the profit and loss account shows nil. A cash break-even, which excludes depreciation and any other non-cash charge, is lower and shows the volume at which the business stops consuming cash. Label whichever one the report uses, because the two can differ materially for a capital-intensive project. ## Sources Rates and rules on this page come from the following. This is a working aid, not professional advice: confirm anything material with your Chartered Accountant before you act on it. - [ICAI: Cost and Management Accounting study material, chapter 14 on marginal costing, for contribution, break-even point and margin of safety](https://resource.cdn.icai.org/66539bos53753-cp14.pdf) ## Stop re-keying these figures Aalekh runs this calculation on your actual client data, pulls the underlying ledgers straight from Tally, and carries the result through to the financial statements and the return. [Get Started](/page-pricing)[Book a demo](/page-contact) ## Related calculators - [ ### NPV & IRR Calculator NPV, IRR, payback and the profitability index for up to eight years of cash flows, read against the discount rate. Open](/calculators/npv-irr) - [ ### Working Capital Cycle Calculator Inventory, receivable and payable days, the operating and cash conversion cycles, and the working capital each day of it ties up. 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