Break-even analysis helps a clothing business estimate the minimum number of garments that must be sold to cover fixed costs. It is useful for evaluating a product launch, a production order, a marketing campaign, or a new pricing scenario.
In apparel, break-even depends on selling price, variable cost per garment, fixed costs, and commercial deductions that reduce the revenue actually kept.
Inputs used in break-even analysis
- Selling price per garment
- Variable cost per garment
- Fixed costs
- Planned discount
- Commercial fees
- Freight-out per garment
Break-even formula
Contribution per garment is the amount left after deducting variable cost and selling deductions from net revenue.
For a detailed explanation of the calculation logic, see the break-even analysis method.
Net revenue per garment
The calculator first estimates the revenue actually kept after discount and commercial fees.
Contribution per garment
Contribution is the amount available to recover fixed costs.
Example: break-even calculation for a clothing business
Suppose a clothing business has the following inputs for a small production run:
- Selling price: $24.00 per garment
- Variable cost: $12.00 per garment
- Fixed costs: $3,000.00
- Planned discount: 10%
- Commercial fees: 5%
- Freight-out: $1.20 per garment
In this example, the business needs to sell at least 410 garments to cover fixed costs.
What the calculator returns
- Break-even units
- Net revenue per garment
- Contribution per garment
- Gross revenue at break-even
- Net revenue at break-even
When break-even is not achievable
Break-even is not achievable when contribution per garment is zero or negative. In that case, each sale does not generate enough contribution to recover fixed costs.
This can happen when selling price is too low, variable cost is too high, deductions are too large, or freight-out consumes too much margin.
Common break-even mistakes
- Using selling price instead of net revenue
- Ignoring discounts or commercial fees
- Forgetting freight-out per garment
- Mixing fixed costs and variable costs
- Assuming break-even means profit has already been achieved
Calculate break-even volume
Use the Break-even Analysis tool to calculate required units, contribution per garment, and revenue at break-even.