Break-Even Price Calculator

{

Reviewed by: Dr. Sarah Patel, Ph.D. in Managerial Economics
Dr. Patel is an expert in cost-volume-profit analysis and strategic pricing models for small and medium enterprises.

The **Break-Even Price Calculator** is an essential tool for setting minimum price levels for new or existing products. This four-variable calculator solves for any missing input: **Break-Even Price (P)**, **Break-Even Quantity (Q)**, **Total Fixed Costs (F)**, or **Variable Cost per Unit (V)**. **Input any three of the four core variables** to find the missing one.

Quantity Sold (Q, Units):

Total Fixed Costs (F, \$):

Variable Cost per Unit (V, \$):

Break-Even Price (P, \$):

Break-Even Price Formulas

The break-even price (P) is the price needed for total revenue to equal total costs ($P \times Q = V \times Q + F$).

$$ P = V + \frac{F}{Q} $$ $$ Q = \frac{F}{P – V} $$ $$ F = Q \times (P – V) $$ $$ V = P – \frac{F}{Q} $$

Formula Source: Investopedia: Break-Even Analysis

Variables Explained

The calculation relies on the core Cost-Volume-Profit (CVP) components:

Break-Even Price (P): The selling price per unit at which the business covers all its fixed and variable costs.
Break-Even Quantity (Q): The number of units sold or produced.
Total Fixed Costs (F): Expenses that do not change with production volume (e.g., rent, salaries, insurance).
Variable Cost per Unit (V): Costs that vary directly with each unit produced (e.g., raw materials, direct labor).

Related Calculators

Analyze company profitability and pricing using these related metrics:

What is Break-Even Price?

The **Break-Even Price** is the price point at which the total revenue generated from sales perfectly matches the total costs incurred (fixed costs plus variable costs). At this price, the business achieves zero profit (or zero loss) for a given level of quantity sold. Determining the break-even price is crucial for managers and business owners as it represents the absolute minimum price they must charge to avoid losing money.

If the market demands a price lower than the break-even price, the business will operate at a loss. Conversely, any price set above the break-even level contributes directly to profit. This tool is often used when budgeting for new products, negotiating supply contracts, or planning strategic price adjustments.

How to Calculate Break-Even Price (Example)

Identify Components:
Assume a company has $\mathbf{Fixed\ Costs\ (F)}$ of $\mathbf{\$5,000}$, $\mathbf{Variable\ Costs\ (V)}$ of $\mathbf{\$10}$ per unit, and expects to sell $\mathbf{Quantity\ (Q)}$ of $\mathbf{1,000}$ units.
Calculate Fixed Cost per Unit:
Fixed costs divided by quantity: $\frac{\$5,000}{1,000} = \mathbf{\$5}$ per unit.
Apply the Break-Even Price Formula:
$$ P = V + \frac{F}{Q} = \$10 + \$5 = \mathbf{\$15.00} $$
Result Interpretation:
The business must charge $\mathbf{\$15.00}$ per unit to cover all costs when selling 1,000 units. Any price below \$15.00 would result in a net loss.

Frequently Asked Questions (FAQ)

Q: How does the Break-Even Price differ from the Target Price?

A: The Break-Even Price is the *minimum* price to avoid a loss (zero profit). The Target Price is the price required to achieve a specific *positive* profit goal.

Q: Can the Break-Even Price change?

A: Yes. The Break-Even Price is highly sensitive to changes in Fixed Costs (F), Variable Costs (V), and the anticipated Quantity Sold (Q). If fixed costs rise, the break-even price must also rise.

Q: What is “Contribution Margin” in this context?

A: At the break-even point, the difference between the Break-Even Price (P) and the Variable Cost (V) is the Contribution Margin, which exactly equals the fixed cost per unit ($F/Q$).

Q: Why is Volume (Q) an input for Break-Even Price?

A: To find the break-even *price*, you need to amortize the fixed costs (F) over a specific sales volume (Q). If Q increases, the fixed cost per unit decreases, lowering the required break-even price.

}