Break-even point in units and euros

"How much do I need to sell just to cover my costs?" is one of the first questions any business owner should answer. The break-even point gives you that number.

What you will learn

• What the break-even point is
• How to calculate break-even in units and in euros of revenue
• Why you round break-even units up
• How to calculate the units needed for a target profit

Explanation

The break-even point is the level of sales where total revenue equals total costs. Profit is exactly zero: no loss, no profit.

Each unit sold brings in its contribution margin. You break even when the total contribution margin equals fixed costs.

Break-even units = Fixed costs ÷ Contribution margin per unit

Break-even revenue = Fixed costs ÷ Contribution margin ratio

Because you cannot sell part of a candle, you round break-even units up to the next whole unit. Rounding down would leave you slightly below break-even.

To find the sales needed for a target profit, add that profit to the fixed costs:

Units for target profit = (Fixed costs + Target profit) ÷ Contribution margin per unit

Worked example

Nordlicht Candles (fictional).

Assumptions: price €16; variable cost €5.70; contribution margin €10.30 per candle; contribution margin ratio 0.64375; fixed costs €546 per month. All amounts exclude VAT; taxes, payment fees and the owner's pay are excluded.

Step 1 – Break-even in units

€546 ÷ €10.30 = 53.01 candles → round up to 54 candles per month

Step 2 – Break-even revenue

€546 ÷ 0.64375 = €848.16 → about €848 per month

Step 3 – Check with whole units

• Revenue at 54 candles: 54 × €16 = €864
• Contribution margin at 54 candles: 54 × €10.30 = €556.20
• Profit: €556.20 − €546 = €10.20 (just above zero)

The €864 is a little higher than €848 because we rounded up to a whole candle.

Step 4 – Units for a target profit of €1,000

(€546 + €1,000) ÷ €10.30 = €1,546 ÷ €10.30 = 150.1 → round up to 151 candles

Limitations: this assumes one product, one price, and costs that behave exactly as planned. If you sell several products or give discounts, the real break-even point will differ.

Common mistake

Practice activity

Calculate on paper for Rheinblick Coffee Cart (fictional):

• Price €3.50; variable cost €0.85; contribution margin €2.65 per cup; contribution margin ratio about 75.7%
• Fixed costs €850 per month
• All amounts exclude VAT; ignore taxes and fees.

1. Break-even in cups per month
2. Break-even revenue per month (use the unrounded ratio €2.65 ÷ €3.50)
3. Check the profit at your rounded number of cups

Key takeaways

• Break-even units = fixed costs ÷ contribution margin per unit; always round up.
• Break-even revenue = fixed costs ÷ contribution margin ratio.
• For a target profit, add it to fixed costs before dividing.
• Break-even is a planning estimate based on your assumptions, not a guarantee.

Next step

In the next lesson, you will look at how pricing and discounts change your contribution margin and break-even point.