Calculate Your Break-Even Point

Excel & Google Sheets

How it works

Price minus variable cost is the contribution margin — the slice of each sale left over after paying for that unit itself, which is the only money available to chip away at rent, salaries, and software. Selling a $50 lamp that costs $30 to make contributes $20; with $12,000 of fixed costs, you need 12,000 ÷ 20 = 600 lamps before the month turns profitable. Every sale past 600 drops that $20 straight into profit. Multiply the break-even units by the price (600 × $50 = $30,000) to get break-even revenue. If the price only just covers the variable cost, the margin is zero, the division blows up with #DIV/0! — and no volume of sales will ever cover your fixed costs.

B2

Fixed costs for the period — rent, salaries, insurance: costs that don't change with volume.

C2

Selling price per unit.

D2

Variable cost per unit — materials, shipping, card fees. C2-D2 is the contribution margin.

When to use it

Use it when pricing a new product, sizing a monthly sales target, or checking whether a price cut still works — if the margin halves, the units needed to break even double.

Common mistakes

• ✕Price equal to (or below) the variable cost.

  ✓A zero margin gives #DIV/0!, and a negative one gives a meaningless negative answer. Guard it: =IF(C2<=D2,"No margin",B2/(C2-D2)) — and rethink the price.

• ✕Using total variable costs instead of per-unit.

  ✓D2 must be the cost of ONE unit. Dividing fixed costs by price minus last month's entire cost of goods produces nonsense — divide that total by units sold first.

• ✕Mixing time periods.

  ✓Monthly fixed costs give a monthly break-even; annual costs give an annual one. Pick one period for B2 and read the answer in the same period.