Question 1

How do I calculate the break-even point?

Accepted Answer

Divide total fixed costs by the contribution margin per unit (price minus variable cost). The result is the units you must sell to cover all costs.

Question 2

What is contribution margin?

Accepted Answer

The price of a unit minus its variable cost, the amount each sale contributes toward fixed costs and, past break-even, toward profit.

Question 3

How do I lower my break-even point?

Accepted Answer

Raise the price, cut the variable cost per unit, or reduce fixed costs. Widening the contribution margin lowers the units needed fastest.

Units Needed to Break Even