Break Even Point

A break even point is a point at which the costs of an activity exactly equal the revenue of the activity. A break even point is therefore a measure of the profitability of an activity. The break even point is usually expressed as a sales volume or sales value, not just a percentage. For example, you can calculate the required number of units or sales to determine the point at which the company breaks even. Percentages are only possible as a share of capacity utilization or as a degree of coverage, but not as the usual way of expressing the break even point. Here you will find everything you need to know about this topic!

Break-Even Point in Two Sentences

The break-even point is the sales volume at which total revenue exactly covers total costs—profit and loss are exactly zero. Below this threshold, a company incurs a loss; every unit sold above it generates a profit.

FC ÷ COGSFormula: Fixed costs divided by contribution margin per unit (selling price − variable costs)

Break-even pointthe German synonym – the point at which the business becomes profitable

Units or €Can be expressed as sales volume or—multiplied by the selling price—as revenue

Rounding upFor unit quantities, numbers are always rounded up—only the next full unit generates a profit

Break Even Point Definition

The break-even point (BEP) is the point at which a company has no profit and is no longer making a loss. In other words, it is the point at which revenues equal expenses. When a company reaches its break even point, it does not necessarily mean that it is now profitable. It simply means that the company has covered its expenses and is now starting to make a profit. There are different types of break even points that can be relevant for different areas of a company. For example, a manufacturer might calculate the break even point to find out how many units of the product it needs to sell to cover the cost of the manufacturing process. Or a service provider might calculate the break even point to find out how many customers it needs to cover its costs. In either case, the break-even point helps minimize a company's financial risk because it tells the company when it will begin to make a profit. It is also a useful tool for pricing, as it tells the company how much it needs to charge for its products or services in order to make a profit. The break even point is not always easy to calculate and can also change over time. Therefore, it is important to regularly review and adjust the break even point. [1]

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Break-Even Calculator with Chart

Enter fixed costs, variable unit costs, and the selling price—the break-even point and chart update in real time:

Fixed Costs (€)

Variable cost per unit (€)

Selling price per unit (€)

Break-even not achievable: The selling price must exceed the variable unit cost—otherwise, every unit sold loses money and fixed costs can never be covered.

3,334 units Break-even point

16,667 Profit threshold in terms of revenue

3.00 Contribution margin per unit

Revenue Total costs Fixed costs Loss zone Profit zone

Sample values for the case study—replace them with your own calculations. The graph shows the range up to twice the break-even quantity.

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Calculate the Break-Even Point in Three Steps

Calculate the contribution margin per unit

Subtract the variable cost per unit from the selling price: Contribution margin = selling price − variable cost per unit. This is the amount that each unit sold contributes toward covering fixed costs.

Example: €5 selling price − €2 variable costs = €3 contribution margin per unit.
Divide fixed costs by the contribution margin

Break-even point = fixed costs ÷ contribution margin per unit. The result is the sales volume at which the total of all contribution margins exactly covers the fixed costs—profit and loss are zero.

Example: €10,000 fixed costs ÷ €3 = 3,333.33 units.
Round up and interpret

Since partial units cannot be sold, the number is always rounded up: Profit begins only at the 3,334th unit. Multiplied by the selling price, this yields the break-even point as revenue (here, approximately 16,667 €). Finally, check the safety margin: How far does your planned sales volume exceed the break-even point? The larger the buffer, the more robust the calculation.

Rule of thumb: If the planned sales volume is only slightly above the break-even point, even small fluctuations in demand can result in losses.

Frequently asked questions (FAQ) on the subject of break-even point

What does the break-even point tell you?

How do you calculate the break-even point?

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Our sources

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[1] Break-Even-Analyse • Definition | Gabler Wirtschaftslexikon: wirtschaftslexikon.gabler.de/definition/break-even-analyse-31893

[2] Steenburgh, Thomas J. & Avery, Jill – “Marketing Analysis Toolkit: Break-even Analysis”, Harvard Business School Note 510-080, 2010

[3] Gewinnschwelle / Break-Even - Produktion - Online-Kurse: ingenieurkurse.de/produktion/einfuehrung-in-die-produktions-und-kostentheorie/kostenfunktionen/begriffe-der-kostenrechnung/gewinnschwelle-break-even.html

[4] Break Even Point - Beispiel, Aufgaben und Lösungen: controllingportal.de/Fachinfo/Kostenrechnung/Break-Even-Analyse.html

[5] Deckungsbeitrag – Was ist der Deckungsbeitrag? | Debitoor Buchhaltung: debitoor.de/lexikon/deckungsbeitrag

[6] Gründerplattform.de (KfW) – (Redaktionsteam), 2021: gruenderplattform.de/ratgeber/break-even-point

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