KEVOS® WORKOS · Money
Break-even and Margin of Safety
How much must you sell before you break even?
Finds the volume at which a product or service covers its fixed costs and shows the profit and margin of safety at the expected volume.
Open the calculatorRuns in your browser. No account needed.
How this tool works
Inputs, units and where to find them
| Input | Unit | Typical source |
|---|---|---|
| Fixed costs | $ | Fixed costs for the period from the budget (rent, salaries, depreciation) |
| Selling price / unit | $ | Net selling price per unit after discounts |
| Variable cost / unit | $ | Variable cost per unit from the costing system |
| Expected volume / period | units | Sales forecast for the same period as the fixed costs |
Method and formulas
- Contribution per unit = price − variable cost
- Break-even units = fixed costs ÷ contribution per unit
- Profit = expected volume × contribution − fixed costs
- Margin of safety = (expected − break-even) ÷ expected
Limitations
- Assumes constant price and unit cost at all volumes
- Single product (or a stable mix)
- Fixed costs assumed constant within the relevant range
Typical uses
- Pricing and launch decisions
- Checking whether a forecast is above break-even
- Testing the effect of fixed-cost changes
Who it is for
- Owners and general managers
- Product and sales managers
- Finance staff
What you get
- ABOVE BREAK-EVEN, THIN MARGIN OF SAFETY, BELOW BREAK-EVEN or NO CONTRIBUTION
- Contribution per unit and margin
- Break-even units and revenue
- Profit and margin of safety at expected volume
Interpreting the result
- A margin of safety under 20% means a modest sales shortfall would cause a loss
- No contribution means volume cannot help: change price or cost
References
- Cost–volume–profit analysis: Horngren, Datar and Rajan, Cost Accounting: A Managerial Emphasis (Pearson)
WORKOS tools are screening and decision-support utilities. Verify important financial, engineering, safety, legal or operational decisions using appropriate professional standards and your organisation’s approved data.
