Chartered Financial Analyst specializing in new product finance and CPG (Consumer Packaged Goods) models.
Find out how many units of your product you need to sell to cover all costs. Enter any three variables—Total Fixed Costs, Sale Price per Unit, Variable Cost per Unit, or Number of Units—to solve for the fourth.
Product Breakeven Calculator
Product Breakeven Formula
The breakeven formula for a product finds the number of units (Q) you must sell for your total revenue to equal your total costs.
Q = F / (P – V)
Solve for Fixed Costs (F):
F = Q * (P – V)
Solve for Sale Price (P):
P = (F / Q) + V
Solve for Variable Cost (V):
V = P – (F / Q)
Variables Explained
- Fixed Costs (F): Total costs to get the product to market, regardless of units sold (e.g., R&D, marketing, tooling, setup fees).
- Sale Price per Unit (P): The price you sell one unit of the product for.
- Variable Cost per Unit (V): The cost to manufacture one unit of the product (e.g., materials, direct labor, packaging).
- Breakeven Units (Q): The number of units you must sell to reach $0 in operating profit.
Related Calculators
- Manufacturing Breakeven Calculator
- Product Pricing Calculator
- Contribution Margin Calculator
- Cost of Goods Sold (COGS) Calculator
What is a Product Breakeven Point?
The **Product Breakeven Point** is the number of individual units a company must sell to cover all the costs associated with producing that product. At this point, the product has not made any profit, but it also hasn’t lost any money. Every unit sold *after* this breakeven point generates pure profit.
This is the most critical calculation to make *before* launching a new product. It answers the question, “Is this idea financially viable?” **Fixed Costs (F)** are all the one-time, upfront costs, such as R&D, product design, creating a mold or tooling, and the initial marketing campaign. **Variable Costs (V)** are the per-unit costs, like raw materials, packaging, and shipping.
The profit made on each unit is the **Contribution Margin** (P – V). This is the dollar amount from each sale that goes towards paying back your large, upfront fixed costs. This calculator tells you how many units you have to sell to pay off that initial investment.
How to Calculate Product Breakeven (Example)
Let’s calculate the breakeven point for a new electronic gadget.
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Identify Fixed Costs (F):
The total upfront costs for R&D, tooling, and marketing are $50,000.
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Identify Sale Price (P):
The company plans to sell each gadget for $50.00.
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Identify Variable Cost (V):
The cost of materials, chips, and labor to make one gadget is $20.00.
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Apply the Formula: Q = F / (P – V)
First, calculate the contribution margin per unit: $50.00 (P) – $20.00 (V) = $30.00.
Next, divide the fixed costs by this margin:
Q = $50,000 / $30.00 ≈ 1,666.67 -
Conclusion:
The company must sell 1,667 units (rounding up) to cover all its initial costs. The 1,668th unit sold will be the first one that generates profit.
Frequently Asked Questions (FAQ)
A business breakeven calculator typically looks at *ongoing* monthly fixed costs (like rent and salaries). A product breakeven calculator is often used for a one-time analysis to see if a *new* product launch is worth the *upfront* investment (like R&D and tooling).
You should include all *upfront* marketing costs for the product launch in your (F). If you have an *ongoing* cost-per-click (CPC) budget, you might add that to your (V) instead (e.g., if it costs $5 in ads to sell one unit).
Yes, perfectly. Your (F) would be your development and marketing costs. Your (V) would be any per-sale cost, such as download bandwidth or payment processing fees (which might be very low, e.g., $1.50). This low (V) is why digital products are so profitable after breaking even.
Work backward. Estimate your Fixed Costs (F), your per-unit Variable Cost (V), and decide how many units (Q) you realistically think you can sell in the first year. Then, solve for (P). This tells you the *minimum price* you must charge to be successful.