Break-Even Price Calculator
Created by: Natalie Reed
Last updated:
Calculate the minimum break-even price that covers unit cost and allocated fixed costs, plus a target price that adds your desired profit margin.
Break-Even Price Calculator
FinanceCalculate the minimum break-even price and a margin-achieving target price for your expected sales volume.
Direct cost to produce or acquire one unit
Total fixed costs for the period, e.g. rent, salaries, insurance
Forecasted unit sales volume over the same period
Desired profit margin as a percentage of the target price
What Is a Break-Even Price Calculator?
A Break-Even Price Calculator determines the minimum price per unit needed to cover both unit cost (cost of goods sold) and an allocated share of fixed costs at your expected sales volume.
Unlike break-even units analysis, which solves for the volume needed at a fixed price, break-even price analysis holds volume constant and solves for the price required — a more natural framing when you are setting a price for a new product with a known sales forecast.
This calculator also computes a target price that adds your desired profit margin on top of the break-even price, plus a price floor reference point equal to just the unit cost with zero contribution toward fixed costs or profit.
Together, these three price points — floor, break-even, and target — give a complete picture of the pricing range from absolute minimum to a margin-achieving target.
Because fixed costs are allocated across your expected unit volume, break-even price is highly sensitive to volume assumptions: a higher expected sales volume spreads fixed costs more thinly per unit and lowers the break-even price, while a lower expected volume concentrates fixed costs onto fewer units and raises it.
This makes the calculator especially useful for new product launches, where pricing and volume forecasts need to be set together rather than independently.
How Break-Even Price and Target Price Are Calculated
Fixed cost allocation per unit equals total fixed costs divided by expected units sold.
Break-even price adds this allocation to unit cost: break-even price = unit cost + (fixed costs / expected units sold).
Target price then solves for the price that achieves a specific margin percentage of revenue on top of the break-even price, using target price = break-even price / (1 − target margin as a decimal).
Contribution per unit at any price point is simply that price minus unit cost, and total contribution at expected volume is contribution per unit multiplied by expected units sold, with profit at volume equal to total contribution minus total fixed costs.
Break-Even Price Formulas
Fixed cost allocation per unit = fixed costs / expected units sold
Break-even price = unit cost + fixed cost allocation per unit
Target price = break-even price / (1 − target margin % / 100)
Contribution per unit (at any price) = price − unit cost
Profit at volume = (contribution per unit × expected units sold) − fixed costs
Example Scenarios
New Product Launch Pricing
Unit cost: $18. Fixed costs: $24,000 (monthly). Expected units sold: 1,200. Fixed cost allocation: $24,000 / 1,200 = $20 per unit. Break-even price: $18 + $20 = $38. With a 25% target margin, target price: $38 / 0.75 = $50.67. At the target price, contribution per unit is $32.67, producing a projected profit of ($32.67 × 1,200) − $24,000 = $15,200 at the expected volume.
Low-Volume Specialty Product
Unit cost: $45. Fixed costs: $15,000. Expected units sold: 200 (a niche, lower-volume product). Fixed cost allocation: $15,000 / 200 = $75 per unit. Break-even price: $45 + $75 = $120. This much higher break-even price (compared to a high-volume product) illustrates why low-volume specialty or custom products require significantly higher unit pricing to absorb the same fixed cost base across far fewer units.
How People Use This Calculator
- Product managers setting an initial price for a new product launch with a known sales forecast.
- Manufacturers evaluating whether a custom or low-volume order can be priced profitably.
- Small business owners determining the lowest defensible price during a clearance or promotional event.
- Consultants and service providers calculating minimum project fees that cover allocated overhead.
- Finance teams stress-testing pricing assumptions against different expected sales volume scenarios.
- Startup founders validating that a planned price point clears break-even at a realistic early sales forecast.
Tips for Setting Break-Even and Target Prices
Use a conservative, realistic expected units sold figure rather than an optimistic best-case forecast, since underestimating volume produces an unnecessarily high break-even price, while overestimating it produces a break-even price that looks achievable on paper but fails to actually cover fixed costs once real sales come in below forecast.
Compare your calculated target price against competitor pricing and customer willingness to pay before finalizing — if the target price needed to hit your margin goal is well above market rates, it is a signal to revisit fixed costs, unit cost, expected volume, or the target margin itself rather than assuming the market will simply accept a higher price.
Frequently Asked Questions
What is break-even price and how is it different from break-even units?
Break-even price is the minimum price per unit needed to cover both the unit cost and an allocated share of fixed costs at your expected sales volume, holding volume fixed and solving for price. Break-even units, by contrast, holds price fixed and solves for the volume needed to break even. The two are complementary: break-even price answers "what do I need to charge at this expected volume?" while break-even units answers "how many do I need to sell at this price?"
How is fixed cost allocated to each unit?
Fixed cost allocation per unit is simply total fixed costs divided by expected units sold over the period. For example, $30,000 in monthly fixed costs spread across an expected 1,000 units sold means each unit must absorb $30 of fixed cost before any profit. This allocated figure is then added to the per-unit cost of goods (COGS) to determine the true break-even price.
How is target price calculated from a desired profit margin?
Target price divides the break-even price by (1 − target margin as a decimal), which is the standard formula for solving price from a desired margin percentage of revenue. For example, a $50 break-even price with a 20% target margin gives a target price of $50 / (1 − 0.20) = $62.50 — at that price, 20% of revenue ($12.50) is profit margin after covering unit cost and allocated fixed costs.
Why does break-even price depend on expected units sold?
Because fixed costs are allocated across the volume of units expected to be sold, a higher expected sales volume spreads fixed costs more thinly per unit, lowering the break-even price, while a lower expected volume concentrates fixed costs onto fewer units, raising the break-even price. This is why the same product can have a very different break-even price depending on whether you expect to sell 100 units or 10,000 units in the period.
What is the price floor, and why is it lower than the break-even price?
Price floor is the absolute minimum price equal to just the unit cost (COGS), with no contribution toward fixed costs or profit at all. Selling at the price floor means every unit sold loses money once fixed costs are considered, since none of the fixed cost allocation is being recovered. It is shown as a reference point for the absolute lowest defensible price in an emergency clearance or loss-leader scenario, not a sustainable pricing target.
How should I use this calculator alongside a break-even units calculation?
Use break-even price when price is the variable you are solving for at a known or planned volume — for example, setting the price for a new product launch with a forecasted sales volume. Use the companion Break-Even Units Calculator when price is already fixed (for example, by market competition) and you need to know the volume required to break even instead.
What happens if expected units sold is very low?
A very low expected units figure dramatically raises the fixed cost allocation per unit, which can push the break-even price to an unrealistically high level that the market will not bear. This is a useful early warning: if the break-even price at your realistic expected volume is far above what competitors charge or what customers will pay, it signals you need to either increase expected volume, reduce fixed costs, or reduce unit cost before the pricing is viable.
Sources and References
- Garrison, Noreen, and Brewer. "Managerial Accounting." McGraw-Hill.
- Corporate Finance Institute. "Cost-Volume-Profit Analysis" methodology resources.
- U.S. Small Business Administration. "Pricing Strategy" planning guidance.