Business
Invoicing, margin & GST calculators
Contribution Margin & Break-Even Calculator
Contribution margin is the profit each unit contributes toward covering your fixed costs, and it is the engine of every break-even calculation. It is simply the selling price minus the variable cost per unit: a $45 product with $30 of variable cost has a $15 contribution margin, and a contribution-margin ratio of 15 / 45 = 33.3% of revenue. Once you know it, the break-even point falls straight out: fixed costs ÷ contribution margin gives the units you must sell to cover fixed costs. With $2,700 of fixed costs and a $15 contribution margin, break-even is 2,700 / 15 = 180 units, or $8,100 in revenue (180 × $45). Enter your fixed costs, price and variable cost to see the contribution margin, its ratio, and both the unit and revenue break-even points. Free, no login.
Contribution margin (CM) = selling price − variable cost per unit
- Contribution-margin ratio = CM / price (the share of each sales dollar that covers fixed costs)
- Break-even units = fixed costs / contribution margin
- Break-even revenue = fixed costs / CM-ratio = price × break-even units
- Worked example — price $45, variable $30: CM = $15, ratio = 33.3%
- Worked example — fixed $2,700 ÷ $15 CM: break-even = 180 units = $8,100 revenue
- If CM ≤ 0 (variable cost ≥ price) there is no break-even — every unit loses money
- Break-even units are rounded up — you cannot sell a fraction of a unit to break even
Frequently asked questions
What is contribution margin?
Contribution margin is the amount each unit sold contributes toward covering fixed costs, after paying its own variable cost. It equals selling price minus variable cost per unit. A product priced at $45 with $30 of variable cost has a $15 contribution margin — every unit sold puts $15 toward the fixed costs, and once those are covered, toward profit. Expressed as a share of price, the contribution-margin ratio here is 15 / 45 = 33.3%, meaning a third of each sales dollar is available to cover fixed costs and profit.
How does contribution margin determine the break-even point?
The break-even point in units is fixed costs divided by the contribution margin, because each unit's contribution chips away at the fixed costs until they are fully covered. With $2,700 of fixed costs and a $15 contribution margin, you break even at 2,700 / 15 = 180 units. In revenue terms that is 180 × $45 = $8,100, which you can also get as fixed costs divided by the contribution-margin ratio: 2,700 / 0.333 = $8,100. Below that volume you make a loss; above it, each additional unit adds its full $15 to profit.
What if the contribution margin is zero or negative?
Then there is no break-even point, because the product cannot cover any fixed costs. A contribution margin of zero means the price exactly equals the variable cost, so each sale contributes nothing; a negative margin means the variable cost exceeds the price, so every unit sold deepens the loss. In both cases the fixed-costs-divided-by-CM formula returns infinity or a negative number, so the calculator reports "no break-even" rather than a misleading figure. The fix is to raise the price or cut the variable cost until the contribution margin turns positive.