Break-Even Quantity

What is this formula?

The Break-Even Quantity calculates the number of units that must be sold for total revenue to exactly equal total costs.

At the break-even point, the business earns neither a profit nor a loss.

When to use it

Use this formula to determine minimum sales targets, evaluate business viability, assess pricing strategies, and support financial planning.

Example

A company manufactures a product.

Data:

Fixed Cost = $120,000

Selling Price = $50/unit

Variable Cost = $30/unit

Formula:

Q=FC/(SP-VC)

Substitution:

Q=120,000/(50-30)

Q=6,000

Result:

Break-Even Quantity = 6,000 units

Applications

Business planning

Cost-volume-profit analysis

Pricing decisions

Investment evaluation

Sales target setting

Managerial accounting

Note

This formula assumes a constant selling price, constant variable cost per unit, and fixed costs that remain unchanged within the analyzed range. Real businesses may experience multiple break-even points, changing cost structures, or varying selling prices.