Break-Even Calculator

Total cost starts at the fixed-cost level and rises by the variable cost of every extra unit; revenue starts at zero and rises by the selling price. The wedge between them left of the crossing is the loss you absorb; the wedge to the right is profit. The steeper the gap, the faster you get there — that steepness is exactly the contribution margin.

Maya runs a small ceramics studio selling planters wholesale. She wants to know how many units she must ship in a year before the studio pays for itself, and how many to hit a $40,000 profit goal.

1. Inputs:Fixed costs $60,000/yr (studio rent, kiln lease, insurance, her salary). Selling price $150 per planter. Variable cost $60 per planter (clay, glaze, packaging, outbound shipping). Target profit $40,000.
2. Contribution margin:Every planter sold leaves $150 − $60 = $90 behind after its own variable cost. That is a 60% contribution margin ratio, and it is the only money available to pay down the $60,000 of fixed cost.
3. Break-even:$60,000 ÷ $90 = 666.67, rounded up to 667 planters. At $150 each that is $100,050 of revenue — at which point $40,020 of variable cost plus $60,000 of fixed cost consume it, with $30 to spare (exact balance is at 666.67 units — 667 is the first whole planter that clears it).
4. Pace check:667 units a year is 56 planters a month, 13 a week, or about 2 per calendar day — averaged over every day of the year, not just the busy season.
5. Target profit:Adding the $40,000 goal gives ($60,000 + $40,000) ÷ $90 = 1,111.1 → 1,112 units, or $166,800 of revenue. Shipping planter 668 through 1,112 is what turns the $40,080 of profit.