Core formulas
The formulas to keep straight
contribution per unit = price - variable cost - feebreak-even units = fixed cost / contribution per unitbreak-even revenue = break-even units x pricebuffered units = break-even units x bufferHow do you calculate break-even point?
Calculate break-even point by subtracting variable cost and fees from price to get contribution per unit. Then divide fixed cost by contribution per unit.
If fixed cost is $1,200 and contribution is $20 per unit, break-even is 60 units.
Break-even math was checked July 3, 2026.
Break-even example, checked July 3, 2026
| Line | Amount | Formula |
|---|---|---|
| Price | $40.00 | Input |
| Variable cost | $18.00 | Input |
| 5% fee | $2.00 | $40 x 5% |
| Contribution | $20.00 | $40 - $18 - $2 |
| Fixed cost | $1,200 | Input |
| Break-even units | 60 | $1,200 / $20 |
What costs go into break-even?
Break-even separates fixed costs from variable costs. Fixed costs happen even before units sell. Variable costs happen with each unit sold.
A launch photo shoot, mold, booth, or setup cost can be fixed. Materials, packaging, labor, and selling fees are usually variable.
The cleaner the cost split, the more useful the break-even number.
Fixed vs variable cost examples, checked July 3, 2026
| Cost | Type | Why |
|---|---|---|
| Product mold | Fixed | Paid before units sell |
| Material per unit | Variable | Changes with unit count |
| Packaging per unit | Variable | Each order uses it |
| Setup photography | Fixed | One launch cost |
| Seller fee | Variable | Taken from each sale |
How do discounts change break-even point?
Discounts raise break-even because contribution per unit falls. If the $40 product is discounted to $32 and costs still total $18 plus a 5% fee, contribution falls to $12.40.
The same $1,200 fixed cost now needs 97 units instead of 60.
Check break-even again before running launch discounts.
Discount impact on break-even, checked July 3, 2026
| Price | Contribution | Break-even units |
|---|---|---|
| $40 | $20.00 | 60 |
| $36 | $16.20 | 75 |
| $32 | $12.40 | 97 |
| $28 | $8.60 | 140 |
Decision table
Break-even decision table, checked July 3, 2026
| Result | Meaning | Action |
|---|---|---|
| Low break-even | Launch is easier to recover | Check demand |
| High break-even | Fixed cost is heavy | Reduce setup or raise contribution |
| Contribution below zero | Every unit loses money | Fix price or cost first |
| Discount raises units sharply | Promotion is risky | Use smaller discount or bundle |
Worked examples
Examples you can compare against your own numbers
Example: product launch break-even
A product has $1,200 fixed launch cost and $20 contribution per unit.
| Fixed cost | $1,200 | |
|---|---|---|
| Contribution per unit | $20 | |
| Break-even units | 60 | |
| Break-even revenue | $2,400 |
Takeaway: The 61st unit is the first unit after break-even.
Open this example in the break-even point calculatorAction checklist
Before you use this number in the real business
- 1Identify fixed costs.
- 2Calculate variable cost per unit.
- 3Add seller fee per unit.
- 4Calculate contribution per unit.
- 5Divide fixed cost by contribution.
- 6Add a buffer above break-even.
Common mistakes
Mistakes that make the answer look better than reality
FAQs
Questions people ask before making the decision
How do I calculate break-even point?
Divide fixed costs by contribution per unit. Contribution is price minus variable cost and fees.
What is contribution per unit?
Contribution per unit is what one sale contributes toward fixed costs after variable cost and fees.
Is break-even the same as profit?
No. Break-even covers costs. Profit starts after break-even.
Should labor be variable cost?
If labor is tied to each unit, include it as variable cost. If it is fixed setup work, include it in fixed cost.
How do discounts affect break-even?
Discounts lower contribution per unit, so more units are needed to break even.
Sources and notes
Where the assumptions come from
General cost, margin, fee, and pricing workflow used in these examples.
Reference definition for gross margin and gross profit.
How FeeProofed checks formulas, examples, source notes, and calculator-backed guide content.