Break-Even Calculator

Break-Even Analysis for Canadian Businesses

Break-even analysis determines the sales volume at which total revenue exactly equals total costs, producing zero profit and zero loss. The formula is straightforward: break-even units = fixed costs / (selling price − variable cost per unit). The denominator—selling price minus variable cost—is called the contribution margin per unit, and it represents how much each sale contributes toward covering fixed costs. Once fixed costs are fully covered, every additional sale generates profit equal to the contribution margin.

Fixed costs remain constant regardless of production volume: rent, salaries, insurance, loan payments, and software subscriptions. Variable costs scale with each unit produced or sold: raw materials, packaging, shipping, payment processing fees, and sales commissions. Some costs are semi-variable—for example, utilities have a base charge plus usage-based charges. For break-even purposes, allocate the base portion to fixed costs and the usage portion to variable costs.

Common Fixed vs Variable Costs

The contribution margin ratio (contribution margin / selling price) is particularly useful for service businesses or companies with diverse product lines, because it expresses break-even in dollar terms rather than units: break-even revenue = fixed costs / contribution margin ratio. This metric helps Canadian small businesses evaluate pricing strategies and determine how much they can afford to spend on marketing while remaining profitable.