Break-even formula
Contribution per unit = price − variable cost. Break-even units = fixed costs ÷ contribution. At $25 price and $9 cost, each sale contributes $16. $4,000 of rent needs 250 sales to break even. After that, each extra unit is contribution toward profit.
This ignores tax, inventory spoilage, and unpaid time. It is a planning number, not a guarantee.
Worked example
Fixed costs $12,000 a month, sell at $40, variable cost $16: contribution $24/unit. Break-even = 12,000 ÷ 24 = 500 units. At 600 units, profit is 100 × $24 = $2,400 before tax.
If you discount the price, contribution falls and you need more units. This ignores inventory, tax, and time. It is a planning sketch, not a cash-flow forecast.
Common questions
What counts as a fixed cost?
Costs you pay even if you sell nothing: rent, insurance, base salary, software.
What if price is below cost?
There is no break-even. Raise price or cut variable cost.