Shut Down Price Calculator
A firm facing weak prices asks one hard question: does staying open lose less money than shutting down for a while? The answer is the shut down price, the lowest per-unit price that still covers everything production can avoid, variable costs plus the avoidable part of fixed costs. Enter your costs and today’s market price below and the calculator finds that price, compares the loss of operating against the loss of shutting down, and tells you which one loses less.
Shutdown price / unit
Total costs
Margin vs market price
If you keep operating
If you shut down
Quick Answer
With fixed costs of $30,000, a variable cost of $5 per unit, 10,000 units, $12,000 of avoidable fixed costs and a market price of $7, the shutdown price is $6.20 per unit. The $7 price clears it by $0.80, so keep operating: the operating loss of $10,000 beats the shutdown loss of $18,000 in unavoidable fixed costs. These are the exact numbers the calculator above returns.
Key takeaways
- The shutdown price is variable cost per unit plus avoidable fixed cost per unit: $5 + ($12,000 ÷ 10,000) = $6.20 in the worked example.
- It is lower than the break-even price ($8.00 here) because break-even also demands the unavoidable fixed costs back, and those are spent either way.
- The tool compares two losses, not profit against zero: operating loses $10,000 here, shutting down loses $18,000. The smaller loss wins.
- The "verdict read" under the results restates the headline verdict, based on price vs shutdown price, so the note can no longer contradict the decision.
- Quick Answer
- How to use the shut down price calculator
- The shut down price formula
- Worked examples, verified against the tool
- Short run vs long run: a shutdown is not an exit
- Reading the tool's verdict note
- What competing calculators miss
- Frequently asked questions
- Add This Calculator to Your Website
- References
How to use the shut down price calculator
Fill in five numbers from your cost records, press Calculate, and read a verdict. The results stay hidden until you calculate, and the inputs come pre-filled with the worked example.
- Split your fixed costs honestly: total fixed costs ($30,000 pre-filled) include everything, and avoidable fixed costs ($12,000) are the part that stops if you shut down. The tool rejects an avoidable figure above the total, because that can never happen.
- Use a real market price: the price buyers are actually paying now, not your target price. The verdict tests whether this price covers your shutdown price.
- Read the verdict first: the big headline tells you whether operating or shutting down loses less, and the stat boxes show the shutdown price, total costs, your margin vs the market price, and both losses side by side.
- Check the note last: it names your unavoidable fixed costs and restates the verdict. Reset restores the worked example.
The shut down price formula
Shut down price = variable cost per unit + (avoidable fixed costs ÷ production volume). Economists call this the average non-sunk cost: every dollar it counts is a dollar you stop spending when you stop producing.
Operating loss = (Price × Volume) − (Fixed + AVC × Volume)
Shutdown loss = Fixed − Avoidable fixed = unavoidable fixed costs
Keep operating when Price ≥ shut down price; the smaller of the two losses is the right choice.
Notice what the formula leaves out on purpose: the unavoidable fixed costs. They appear in neither the shutdown price nor the shutdown loss, because they are spent whether you produce or not. If every fixed cost is avoidable, the shutdown price equals the average total cost, a point the Munich working paper on the shutdown decision demonstrates with a worked numerical example. Getting this split right is the whole exercise: the IRS discussion of deductible business expenses in Publication 535 is a useful discipline for sorting your cost ledger, and a companion avoidable cost calculator can help you isolate the avoidable figure this tool needs.
Worked examples, verified against the tool
The pre-filled example is a factory with $30,000 of fixed costs, $5 variable cost per unit, 10,000 units, $12,000 of avoidable fixed costs and a $7 market price. Running it gives $6.20, and the arithmetic behind that figure is:
| Scenario | Shutdown price | Operating result | Shutdown result | Verdict |
|---|---|---|---|---|
| Worked example, price $7.00 | $6.20 | Loss of $10,000.00 | Loss of $18,000.00 | Keep operating |
| Price falls to $5.50 | $6.20 | Loss of $25,000.00 | Loss of $18,000.00 | Shut down temporarily |
| Price exactly at $6.20 | $6.20 | Loss of $18,000.00 | Loss of $18,000.00 | Keep operating (a tie) |
| No avoidable fixed costs | $5.00 | Loss of $10,000.00 | Loss of $30,000.00 | Keep operating |
The third row is the elegant edge case: at exactly the shutdown price the two losses tie at $18,000, so the tool keeps operating (price ≥ shutdown price wins ties). The fourth row shows what happens when nothing is avoidable: the shutdown price collapses to the $5 variable cost and shutting down is always the worse choice, since every fixed dollar is spent either way. Every row above is a real run of this calculator, so type the numbers in and check them.
Short run vs long run: a shutdown is not an exit
This tool answers a short-run question only. Shutting down means pausing production while keeping the business alive: you stop the line, send the temporary crew home and stop the output-linked bills, but the lease, the loans and the core staff stay. Exiting means selling up and walking away, which only makes sense if the price will never cover even your total costs again.
| Decision | Price test | What you lose |
|---|---|---|
| Keep operating (short run) | Price ≥ shut down price | Operating loss, smaller than the unavoidable fixed costs |
| Shut down temporarily (short run) | Price < shut down price | Unavoidable fixed costs only |
| Exit the market (long run) | Price < break-even price, persistently | You stop the fixed costs too, but pay any exit costs |
The distinction matters because the two losses this tool compares only make sense together in the short run. In the long run every cost is avoidable, the shutdown price and the break-even price converge, and the question becomes whether the business should exist at all. Lumen Learning's shutdown point chapter walks through this short-run/long-run boundary with the textbook cost curves. If the alternative to operating is a full exit rather than a pause, an opportunity cost per unit view of what the freed resources could earn elsewhere belongs in the analysis too.
Reading the tool's verdict note
The small note under the results restates the verdict, not a second opinion. It reads "Continue operations" exactly when the market price covers the shutdown price, and "Shut down temporarily" exactly when it does not, so the note and the headline can no longer disagree.
The headline verdict is the economics: it compares the market price against your shutdown price and picks whichever of operating or shutting down loses less money. In the $5.50 scenario above, for instance, the verdict says shut down (the $25,000 operating loss exceeds the $18,000 unavoidable fixed costs), and the note under the results now says the same, because it is derived from the same price-versus-shutdown-price comparison instead of from the avoidable-cost share. This framing also feeds straight into pricing discipline, where an increase in contribution margin analysis shows what each extra unit above the shutdown price actually contributes toward the unavoidable costs, and a fixed cost percentage check keeps the unavoidable share of your cost structure visible.
What competing calculators miss
The shut-down calculators ranking today split into two camps, and each leaves something on the table:
- Two-input formula tools (Calculator Ultra, Calculator Doc): they compute ANSC = AVC + ANFC and stop there. Calculator Ultra even labels AVC the "average variance cost", a typo for variable that betrays how little attention the page pays its own subject. Neither takes a market price, so neither can tell you whether to keep operating, and neither compares the two losses.
- Full microeconomics tools (a CFA-authored competitive-firm calculator): genuinely strong on theory, with a quadratic cost function, profit maximization at P = MC, ATC and AVC curves and a proper decision table. But it needs cost-function coefficients (a, b) that a working business owner does not have on hand, and it treats all fixed costs as sunk, so there is no avoidable-cost decomposition at all.
- AVC-only calculators (OnlyCalculators' average variable cost page): nicely itemized, and right that price below AVC means shut down. But AVC is only the shutdown price when no fixed costs are avoidable; the moment any fixed cost is escapable, the true threshold is higher and these tools understate it.
- Exam Q&A pages: correct theory (P < min AVC means shut down) with no tool at all.
- The gap this page fills: five plain business numbers instead of cost-function coefficients, a verdict that names the smaller loss in dollars rather than a curve position, the avoidable-fixed decomposition that AVC-only tools skip, and a verdict note that restates that verdict instead of offering a second opinion. Pre-fill the worked example, press Calculate, and every figure on the page reproduces exactly.
Frequently asked questions
The lowest per-unit price at which a firm should keep producing in the short run: variable cost per unit plus avoidable fixed cost per unit. Below it, pausing production loses less money than operating. Above it, operating loses less than the unavoidable fixed costs you would pay anyway.
The shutdown price covers only avoidable costs; the break-even price covers all costs including the unavoidable fixed ones. In the worked example the shutdown price is $6.20 while break-even is $8.00, because $1.80 per unit of unavoidable fixed cost is spent whether you produce or not.
Fixed costs that stop when you stop producing: temporary labor, utilities for the production line, maintenance you can pause, product-specific marketing. Long-term rent, loan interest and core salaries continue during a shutdown, so they are unavoidable. The calculator rejects an avoidable figure above total fixed costs.
Only briefly and with a reason: a temporary price dip you expect to reverse, a strategic contract, or restart costs that exceed the extra loss. Sustained operation below the shutdown price destroys value, because every unit loses money and you would lose less by pausing.
It restates the headline verdict, which compares the market price against the shutdown price: it reads "Continue operations" when the price covers the shutdown price and "Shut down temporarily" when it does not. An earlier version sorted by avoidable-cost share instead, which could contradict the verdict; that rule-of-thumb banding has been removed.
No. Shutting down here means a temporary pause in production: the line stops but the business survives and can restart when prices recover. Closing the business permanently is an exit, a long-run decision that compares the price against total costs including the currently unavoidable ones.
Then the shutdown price equals your variable cost per unit, and shutting down is always the worse option, since every fixed dollar is spent either way. The calculator handles this directly: enter 0 for avoidable fixed costs and the shutdown loss line equals total fixed costs.
Whenever costs, volume or market prices move materially. In volatile markets a monthly recalculation is reasonable; in stable ones, each budgeting cycle or contract round is enough. The inputs are quick, so the cost of checking is far lower than the cost of operating a quarter below your shutdown price.
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References
- OpenStax. Microeconomics 2e. Accessed October 24, 2026.
- Lumen Learning, SUNY Microeconomics. The Shutdown Point. Accessed October 24, 2026.
- Munich Personal RePEc Archive. On the shutdown decision with avoidable and sunk costs (working paper). Accessed October 24, 2026.
- Khan Academy. AP Microeconomics. Accessed October 24, 2026.
- Internal Revenue Service. Guide to Business Expense Resources. Accessed October 24, 2026.