Find out how many units you must sell (or revenue you must earn) to cover all your costs.
Break-even analysis determines the point at which total revenue equals total costs — the point where you start making a profit. It's essential for pricing decisions, startup planning, and evaluating new products.
The contribution margin is the difference between selling price and variable cost per unit. Each unit sold "contributes" this amount toward covering fixed costs. Once fixed costs are covered, every additional unit contributes directly to profit.
If you sell widgets at $50 each with $20 variable cost and $50,000 in fixed costs: Contribution margin = $30/unit. Break-even = $50,000 / $30 = 1,667 units or $83,333 in revenue.