Break-even analysis builds off of contribution margin to determine the amount of sales needed for a company to break even between expenses and profits. Every product has a break-even point where it becomes profitable after a certain number of units sold. If your business had zero fixed costs and a positive contribution margin, then you'd hit your break-even point on your first sale. To calculate a break-even point, calculate the contribution margin for a product and then divide the fixed cost expenses by it. The results will show how many units of the product your business must sell to break even. Here's an example: Your business sells 100 products at $1,000 per product. Total fixed costs are $35,000 for this $100,000 in sales. Variable costs are $300 per product, thus the contribution margin is $700 or 70% per product. Your break-even point is when your cumulative contribution margin exceeds your total fixed costs. In this case, you hit your break-even point once you sell 50 products or $50,000 in sales. Here's the math for both: 1. Total fixed costs ($) / Contribution margin ($) = Break-even point (products) $35,000 / $700 = 50 products 2. Total fixed costs ($) / Contribution margin ratio (%) = Break-even point ($) $35,000 / 0.7 = $50,000