The formula
Contribution = AOV - COGS - shipping - AOV x fee% - AOV x return% - otherBreak-even ROAS = AOV / contributionA $90 order with $27 product cost, $8 shipping, $2 other costs, 3% payment fees and 5% returns keeps $90 - $37 - $7.20 = $45.80. Break-even ROAS is 90 / 45.80 = 1.97, and the most you can pay for that order (max CPA) is $45.80.
Why it matters
A ROAS of 2.0 means very different things for a 70% margin product and a 30% margin product. Without your own break-even line you cannot tell a winner from an ad that is quietly losing money on every sale. The common shortcut, 1 / gross margin, ignores shipping, fees and returns, so it sets the line too low.
How to improve it
Raise the line you can clear by raising AOV (bundles, thresholds for free shipping) or lowering variable cost per order. Then judge ads against it: scale what sits clearly above break-even ROAS, fix or cut what sits below it.





