Break-even Analysis Explained
A practical guide to estimating how many garments you need to sell to recover fixed costs.
Break-even analysis helps apparel businesses estimate the minimum sales volume required to recover fixed costs. It is useful for deciding whether a style, price plan, campaign, or order scenario is economically viable.
In garment manufacturing, break-even depends on fixed costs, selling price, variable cost per garment, and any deductions that reduce the revenue actually kept per garment.
What is break-even?
Break-even is the point where total contribution exactly covers fixed costs. At that level, the business is not generating profit, but it is no longer operating at a loss.
Core break-even formula
Contribution per garment is the amount remaining after subtracting variable cost, freight-out, and other selling deductions from net revenue per garment.
What this calculator is based on
The Break-even Analysis tool starts from selling price per garment, variable cost per garment, and total fixed costs. It also allows discounts, fees, and freight-out to be included when they affect the contribution available to recover fixed costs.
- Selling price per garment: nominal selling price before deductions.
- Variable cost per garment: production cost or other variable cost per unit.
- Fixed costs: total costs that do not vary directly with units sold.
- Commercial deductions: discount, fees, and freight-out that reduce contribution.
Inputs used by the tool
- Selling price per garment
- Variable cost per garment
- Fixed costs
- Planned discount
- Commercial fees
- Freight-out allocation per garment
Formulas used by the tool
The calculator first estimates net revenue per garment, then calculates contribution per garment, determines the break-even volume, and estimates gross and net revenue at break-even.
If no discounts, fees, or freight-out are entered, the calculation works as a direct break-even estimate based on selling price, variable cost, and 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
Why contribution per garment matters
Break-even volume is highly sensitive to contribution per garment. When contribution is small, the number of garments required to recover fixed costs rises quickly.
This is why small changes in discount, fees, freight-out, selling price, or variable cost can have a strong impact on commercial viability.
When break-even becomes impossible
If contribution per garment is zero or negative, break-even cannot be reached. In that situation, selling more garments does not recover fixed costs.
That usually means the selling price is too low, the variable cost is too high, or commercial deductions are too heavy.
Fixed costs vs variable cost
Variable cost is calculated per garment and changes with the number of units produced or sold. Fixed costs are total costs and do not depend directly on how many units are produced.
This distinction is important because break-even divides total fixed costs by contribution per garment.
What this calculator does not do
This tool does not calculate production cost from fabric, labor, trims, packaging, or overhead inputs, and it does not define selling price. It assumes those values are already available.
Production cost and pricing are handled by separate tools, while MOQ planning is handled in the MOQ Calculator.
Recommended workflow
- Estimate fabric consumption.
- Estimate production cost per garment.
- Define selling price and profitability.
- Calculate break-even volume.
- Continue to MOQ analysis if needed.
Use the Pricing / Profit Engine to define selling price and profitability before calculating break-even.
Calculate break-even volume
Use the Break-even Analysis tool to estimate how many garments you need to sell to recover fixed costs under different commercial conditions.