How to Find the Break-Even Point
The break-even quantity equals fixed cost divided by price minus average variable cost, and the break-even price equals minimum average total cost.
The Break-Even Point formula
Calculator
Enter fixed cost, price and average variable cost to get the break-even quantity and check profit is zero.
Costs owed whatever the firm sells this period.
What each unit sells for.
Variable cost carried by each unit produced.
Selling 400 units is where total revenue catches total cost and economic profit hits zero.
- Contribution per unit
- $15
- Total revenue at break-even
- $10,000
- Total cost at break-even
- $10,000
- Average total cost at break-even
- $25
- Verdict
- Price covers variable cost
Every unit sold leaves $15 toward fixed cost once its own variable cost is paid.
Price times the break-even quantity brings in $10,000.
Fixed cost plus variable cost on those units comes to $10,000, matching revenue exactly.
Cost per unit lands on $25, the same as the price, which is what breaking even means on the graph.
Each sale chips away at fixed cost, so a large enough quantity gets the firm to zero economic profit.
How to calculate Break-Even Point, step by step
- 1Find the contribution per unit. Subtract average variable cost from price: each unit sold contributes P − AVC toward covering fixed cost.
- 2Divide fixed cost by that contribution. Q = FC ÷ (P − AVC) gives the units needed before total revenue catches total cost.
- 3Or read the break-even price off the cost curves. The break-even price is the lowest point of the ATC curve, where price just equals average total cost.
- 4Confirm profit is zero. Check that TR = P × Q equals TC = FC + (AVC × Q) at that quantity.
Worked example: Break-Even Point
Fixed cost is $6,000 a month, price is $25, and average variable cost is $10. Each unit contributes 25 − 10 = $15, so the break-even quantity = 6,000 ÷ 15 = 400 units. Checking: TR = 400 × 25 = $10,000 and TC = 6,000 + (400 × 10) = $10,000, so profit is zero and ATC = 10,000 ÷ 400 = $25, exactly the price.
Break-Even Point questions
Is the break-even point the same as the shutdown point?
No, a firm breaks even where price equals minimum ATC, while it shuts down only when price drops below minimum AVC, which is a lower price.
Does breaking even mean the owner earns nothing?
No, zero economic profit is normal profit: revenue covers every explicit cost plus the opportunity cost of the owner's own time and money.
How do you find the break-even point on a graph?
Look for where the price line crosses the ATC curve; when price sits at minimum ATC that crossing is the single break-even quantity.
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