Find your break-even point from fixed and variable costs, or check gross margin and markup from cost and selling price.
Break-even units = Fixed costs ÷ (Price per unit − Variable cost per unit). The denominator — price minus variable cost — is the contribution margin: how much each sale contributes toward covering fixed costs after its own variable cost is paid. Break-even revenue is just break-even units × price per unit.
Fixed costs don't change with how many units you sell — rent, salaries, insurance, software subscriptions. Variable costs scale with each unit sold — materials, per-unit shipping, payment processing fees, sales commissions. The same expense can be fixed or variable depending on the business: a salaried support rep is a fixed cost, a commission-only sales rep is a variable one.
Both compare profit to cost, but against a different base: gross margin = profit ÷ selling price, while markup = profit ÷ cost price. A 50% markup on a $100 cost gives a $150 selling price ($50 profit ÷ $100 cost), but that's only a 33% gross margin ($50 profit ÷ $150 selling price) — the two numbers are never equal except at 0%, and mixing them up is a common pricing mistake that leads to underpricing.
If the variable cost of making one more unit exceeds what you sell it for, every additional sale loses money — there's no volume of sales that recovers fixed costs, since the gap widens with every unit sold rather than narrowing. Fixed costs would need to be cut, price would need to rise, or variable cost would need to fall before a break-even point exists at all — the calculator flags this case rather than showing a misleading number.
It's a planning tool as much as a diagnostic one — before launching a product, break-even volume tells you whether the required sales are realistic for your market size. It's also useful for pricing decisions: raising price per unit lowers the break-even volume needed, which is often an easier lever to pull than cutting fixed costs.
Worked example: with $10,000 in fixed costs, a $50 price per unit, and $20 variable cost per unit, the contribution margin is $30/unit (60% of price), so break-even is 10,000 ÷ 30 ≈ 334 units, or $16,700 in revenue. Separately, an item costing $60 sold for $90 has a $30 gross profit — a 33.3% gross margin but a 50% markup on cost.