How this calculation works
Contribution per unit equals selling price less variable cost. Break-even units are fixed costs divided by contribution, rounded up to whole units. Multiply by price for the required sales revenue.
A worked example
R20 000 fixed costs with R200 price and R120 variable cost need 250 units and R50 000 sales to break even.
Assumptions & limitations
- One product and constant price/cost are assumed. Fixed costs and sales must refer to the same period. Where contribution is zero or negative and fixed costs are positive, no finite sales volume breaks even.
