function calculateBreakEven() {
var fixedCostsInput = document.getElementById('fixedCosts');
var priceInput = document.getElementById('pricePerUnit');
var variableInput = document.getElementById('variableCosts');
var errorDiv = document.getElementById('beError');
var resultsDiv = document.getElementById('beResults');
// Reset display
errorDiv.style.display = 'none';
resultsDiv.style.display = 'none';
var fixedCosts = parseFloat(fixedCostsInput.value);
var pricePerUnit = parseFloat(priceInput.value);
var variableCosts = parseFloat(variableInput.value);
// Validation
if (isNaN(fixedCosts) || isNaN(pricePerUnit) || isNaN(variableCosts)) {
errorDiv.innerText = "Please enter valid numeric values for all fields.";
errorDiv.style.display = 'block';
return;
}
if (pricePerUnit <= variableCosts) {
errorDiv.innerText = "Sales Price must be greater than Variable Cost to ever break even.";
errorDiv.style.display = 'block';
return;
}
if (fixedCosts < 0 || pricePerUnit < 0 || variableCosts < 0) {
errorDiv.innerText = "Values cannot be negative.";
errorDiv.style.display = 'block';
return;
}
// Calculations
// Contribution Margin = Price – Variable Costs
var contributionMargin = pricePerUnit – variableCosts;
// Break Even Units = Fixed Costs / Contribution Margin
var breakEvenUnits = fixedCosts / contributionMargin;
// Break Even Revenue = Break Even Units * Price
var breakEvenRevenue = breakEvenUnits * pricePerUnit;
// Contribution Margin Ratio = (Contribution Margin / Price) * 100
var marginRatio = (contributionMargin / pricePerUnit) * 100;
// Display Results
document.getElementById('resultUnits').innerText = Math.ceil(breakEvenUnits).toLocaleString() + " Units";
document.getElementById('resultRevenue').innerText = "$" + breakEvenRevenue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resultMargin').innerText = "$" + contributionMargin.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resultRatio').innerText = marginRatio.toFixed(2) + "%";
resultsDiv.style.display = 'block';
}
How to Calculate Break-Even Rate
Calculating your break-even rate (or break-even point) is one of the most fundamental financial exercises for any business owner, financial analyst, or startup founder. It identifies the precise moment when your total revenue equals your total costs—meaning you are neither making a profit nor suffering a loss.
Understanding this metric helps you set appropriate pricing strategies, control costs, and determine the sales volume required to ensure business viability.
The Break-Even Formula
To perform a break-even analysis, you need three core variables:
Fixed Costs: Expenses that remain constant regardless of how much you sell (e.g., rent, insurance, software subscriptions, salaried payroll).
Variable Costs: Expenses that fluctuate directly with sales volume (e.g., raw materials, shipping fees, sales commissions).
Sales Price: The amount you charge customers for one unit of your product or service.
The standard formula to find the number of units you need to sell is:
Break-Even Point (Units) = Fixed Costs ÷ (Sales Price per Unit – Variable Cost per Unit)
The denominator (Price – Variable Cost) is known as the Contribution Margin. This represents the amount of money from each sale that is available to pay down fixed costs. Once fixed costs are covered, the contribution margin becomes pure profit.
Example Calculation
Let's say you run a specialized coffee roasting business:
Fixed Costs: $5,000 per month (Rent, Utilities, Equipment loan).
Sales Price: $20 per bag of coffee.
Variable Costs: $8 per bag (Green beans, packaging, labels).
First, calculate the Contribution Margin per unit:
$20 (Price) – $8 (Variable Cost) = $12
Next, divide the Fixed Costs by the Contribution Margin:
$5,000 ÷ $12 = 416.66
You would need to sell approximately 417 bags of coffee per month to break even. Any sale after bag #417 generates profit.
Why is the Break-Even Rate Important?
Calculating this rate allows businesses to:
Price Smarter: If your break-even volume is unrealistically high, you may need to raise prices or find cheaper suppliers.
Set Targets: Sales teams can be given clear targets based on the minimum volume needed to cover costs.
Secure Funding: Investors always ask for break-even analysis to understand the risk profile of a new venture.
Analyze Risk: It helps you understand how much sales can drop before the business starts losing money (margin of safety).
Contribution Margin Ratio
Our calculator also provides the Contribution Margin Ratio. This is the percentage of sales that remains after variable costs are covered. In the example above, the ratio is ($12 / $20) = 60%. This means 60 cents of every dollar earned is available to cover fixed costs and eventually generate profit.