How the math works
How to use it
- Put every cost that happens whether or not you sell anything into fixed costs — rent, insurance, software, and your own wage if you pay yourself one. Leaving your own wage out is the most common way a business looks profitable and cannot pay you.
- Put every cost that only happens because a sale happened into variable cost per unit: materials, packaging, shipping, the hour of labor.
- Set the processing fields to whatever your card processor actually charges. A percentage plus a fixed amount per sale is the normal shape. Set them to 0 if you are paid in cash or by transfer.
- Read the breakeven number first, then the margin of safety. The safety figure is how far sales can fall before you are working for free, and it is the number that tells you whether the business has any slack in it.
A worked example
Fixed costs of $3,200 a month, a unit that costs $14 to make, priced at $35, with processing at 2.9% + $0.30. The true variable cost is $15.32, not $14 — processing quietly takes $1.32 out of every sale. Contribution margin is $19.68, so breakeven is 163 units a month. At 200 units the profit is $737 and the margin of safety is 19%. That 19% is the whole story: a fifth off a slow month and the business earns nothing. Raising the price to $38 moves breakeven to 142 units and the safety margin to 29%.
Where this sits in the Financial Literacy resource
A calculator tells you where you are. It does not tell you what to do next, and a number without a plan behind it tends to produce anxiety rather than progress. These stages are free, need no account, and cover the decision this calculator is measuring.
Common questions
What is a contribution margin?
It is what one sale contributes toward your fixed costs, after every cost caused by that sale is taken out. Price minus true variable cost. Once contribution margins across all your sales add up to your fixed costs, you have broken even; everything after that is profit. It is a more useful number than gross margin when you are deciding whether to take on one more order.
Should I include payment processing in the unit cost?
Yes. It is a real cost of every sale and it scales with your price, which is exactly what a variable cost is. Leaving it out is why a seller can believe they are running a 60% margin and actually be nearer 52%. This calculator keeps it in a separate field so you can see how much of your price it is taking.
What if my contribution margin is negative?
Then there is no breakeven point and selling more units makes the loss bigger, not smaller. The calculator says so rather than printing a number, because a breakeven figure in that situation would be meaningless. Either the price has to rise or the unit cost has to fall; volume cannot fix a negative margin.
Is gross margin the same as markup?
No, and confusing them is expensive. Margin is measured against the price; markup is measured against the cost. A $14 item sold at $35 is a 150% markup and a 60% margin. If you set prices with a markup number believing it is a margin, you will systematically undercharge.
Does this account for tax?
No. Breakeven here is a pre-tax operating figure, which is the standard way it is quoted and the right basis for a pricing decision. Tax comes out of profit after this line, and how much depends on your business structure, your state and your other income.
What this calculator is not
It is an educational model, not a projection and certainly not advice. It knows nothing about your income, your state, your debts or your benefits status, and it ignores taxes and fees unless the page says otherwise. If you receive SSI or SSDI some of this math works differently and getting it wrong can cost you eligibility — start with the Disability Wealth Guide instead. Our sourcing and correction policy is on the editorial standards page.
Nothing here is stored. Every calculation runs in your browser. No numbers are transmitted, logged or saved to any server, and no account is required. Close the tab and it is gone.