Potato Chip Manufacturing Break-Even Analysis: $105K Monthly Revenue

Fixed costs $86.2K/mo monthly base

Contribution margin 82% after variable costs

Break-even revenue $105.3K/mo revenue target

Break-even timing Month 1 launch month

Break-even calculator

Test monthly revenue, variable expenses, and fixed costs against break-even for a potato chip manufacturing model.

Lean Base Full

Monthly revenue Revenue sets the cash available to cover variable costs and then fixed costs. $ Thin sales Strong sales Variable expenses Use direct plant, distribution, and marketing costs that rise with output. $ Tight costs Heavy costs

Money available to cover fixed costs $864,931 $1,035,258 revenue - $170,327 variable expenses

Margin ratio

84%

Covers fixed costs

Yes

Fixed monthly costs These are the monthly overhead costs break-even must absorb. $ Lean overhead High overhead

Break-even chart Revenue Total costs

Which potato chip factory expenses stay fixed, and which move with sales?

Cost classification

Break-even is only useful if rent-like costs stay fixed and bag-level inputs move with volume. Here, $15,000/month factory rent is fixed, while potatoes at $0.08 per bag and distributor fees as revenue percentages must flex with sales.

Expense	Cost	Break-Even Treatment	Common Mistake
Factory Rent	Fixed	Use $15,000 per month from Month 1 through Month 60 as fixed overhead.	Spreading rent per bag and making break-even look easier at low volume.
Business Insurance	Fixed	Use $2,000 per month as fixed overhead in the monthly break-even base.	Modeling insurance as a sales percentage instead of a stable monthly bill.
Potatoes	Variable	Apply $0.08 per bag, so the expense rises with units produced.	Holding raw potato spend flat while production grows.
Packaging Materials	Variable	Apply $0.03 per bag because each finished bag needs packaging.	Treating packaging as fixed because materials are bought in bulk.
Direct Labor per Unit	Variable	Apply $0.01 per bag as production volume changes.	Treating all production labor as fixed payroll.
Distributor Fees	Variable	Use the revenue percentage, starting at 8.0% in the first year and declining by year.	Locking distributor fees into fixed overhead and understating sales growth costs.
Factory Utilities	Semi-variable	Combine Fixed Utilities at $1,500 per month with Factory Utilities at 0.5% of revenue.	Treating all utilities as rent-like fixed overhead.
Production Supervision	Semi-fixed	Model salaried supervision in staffing steps, plus the 0.3% of revenue production supervision charge.	Assuming supervision scales smoothly with every bag sold.

How does break-even change from the lean Year 1 chip plan to the full Year 5 plan?

Scenario table

The lean case has the tightest cushion because plant and labor costs sit on a smaller revenue base. By the full case, higher throughput spreads overhead better, and the contribution margin rises from 81.9% to 85.6%.

Planning assumptions only; actual results will move with yield, pricing, and cost control.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean Year 1 case	$428k	$78k	$86k	81.9%	$265k	Month 1 break-even, but the cushion is the thinnest.
Base Year 2 case	$732k	$128k	$97k	82.6%	$506k	Month 1 break-even with a steadier cushion from scale.
Full Year 5 case	$1.53m	$221k	$139k	85.6%	$1.17m	Month 1 break-even and the best overhead absorption.

What breaks first if chip sales soften or input costs jump?

Stress test

At $428,000 of monthly revenue versus $105,000 break-even, the plan has about $323,000 of cushion. That cushion shrinks fast if sales dip or if potatoes, oil, packaging, utilities, and distributor fees move together.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change.	$105,000	$323,000 cushion	The cushion is strong, but it depends on steady sell-through.
Revenue shortfall	Revenue drops 30%.	$105,000	$195,000 cushion	A sales miss still covers fixed costs, but the cushion gets much thinner.
Fixed-cost pressure	Fixed costs rise 25%.	$131,250	$296,750 cushion	Overhead creep pushes break-even up without helping volume.
Margin pressure	Contribution margin falls to 70%.	$150,000	$278,000 cushion	Higher ingredient and fee costs hit every bag and lift break-even fast.
Combined pressure	Revenue drops 30%, margin falls to 70%, and fixed costs rise 25%.	$198,000	$102,000 cushion	Small misses on volume, price, or overhead can turn into a cash squeeze.

Can you prove the plant, supply, and sales plan before you sign the lease and buy the line?

Founder checklist

Don’t commit to the lease or the equipment until the first-year volume, cash trough, and distributor plan all line up. This model assumes 1.32M bags in Year 1, $1.9M of capex, and a $567K cash low in Month 4, so one weak link can break the launch.

1Demand proof1.32M bags

Verify buyers can absorb the full first-year volume mix before you lock the site, because idle capacity turns into cash burn fast.

2Facility load$24.5K/mo

Check that the plant layout and rent work for $15K in monthly factory rent plus $24.5K of fixed expenses, or the site will eat margin before volume lands.

3Unit margin83.9%

Confirm the average bag still clears the $0.20 direct unit cost plus 8.0% distributor fees and 3.0% marketing, which leaves about 83.9% before payroll and rent.

4Throughput crew4.0 FTE

Build staffing from the first-year run rate, because the plan starts with 4.0 production line workers and a supervisor, not a future volume guess.

5Cash trough$567K

Keep at least $567K in reserve by Month 4, since that is the cash low point while capex and ramp costs are still hitting.

6Launch channel8.0%

Lock potatoes, oil, seasonings, packaging, and distributor commitments before test runs, because Year 1 distributor fees already take 8.0% of revenue and any supply miss stops shipments.