Break-even: drag the price
Drag the handle to raise the price. The headline is how many units cover the fixed costs. The default run is a price of 35 against a variable cost of 20 and fixed costs of 24,000, so break-even is 1,600 units. Each unit past that adds the margin, which is price minus variable cost.
Break-even units
1600
Sales at that count
$56,000
Drag the bar down to raise the price and cut the count. Illustrative arithmetic, not a sales forecast or advice.
In short
- Drag the handle up to raise the price and cut the unit count.
- Watch the contribution margin move with the price. Variable cost is held still unless you move its slider.
- Cut fixed costs and the count falls in proportion, whatever the margin is.
- Push the price down toward the variable cost, where the margin vanishes and the count runs away.
Fixed costs, then a margin, then a count
Break-even units are fixed costs divided by the contribution margin, which is price minus variable cost per unit. On the default run that margin is 15, so 24,000 / 15 is 1,600 units, or 56,000 of sales.
Every extra unit of price goes straight into the margin. That is why dragging the price cuts the count harder than cutting fixed costs of the same dollar size. How break-even analysis works is the long form, with the break-even calculator under the answer.
The operating leverage shape
High fixed costs with a wide margin: break-even sits a long way out, and every unit past it is worth a lot. Low fixed costs with a thin margin break even early and then climb slowly. That shape is operating leverage, and it is not the same object as debt on a balance sheet. Operating against financial leverage is the pair. Variable costs are the line that moves with the next unit.
A profit target is more units of the same margin
Put a profit target on top of the fixed costs and it behaves like more overhead, because both have to come out of the same margin. Past break-even, profit piles up at the margin per unit. This picture is the floor, not the plan.
Common questions
What if the price sits at or below variable cost?
There is no contribution margin, so there is no finite break-even. Every unit sold adds to the loss. The explorer stops the price just above variable cost rather than printing a nonsense count.
Is this a cash break-even?
No. It is an accounting break-even: revenue equal to costs. Principal repayments on a loan are cash leaving the account, not an expense. Put the whole payment into fixed costs and you are answering that higher question instead.
Are these figures a forecast of sales?
No. They are the volume that covers the costs you set. It is educational material, not advice.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.