Break-Even Point Formula (Contribution Margin)
Total fixed costs (including capital expenditures) divided by per-unit contribution gives the break-even units. The follow-on question: can the expected market absorb that volume — i.e., is the project viable?
The formula
BEQ = TFC / CM
How many units must be sold to cover all fixed costs and COGS, expressed via contribution margin.
What goes into it
- Total Fixed Costs (TFC, including capital expenditures)
- Contribution Margin per unit (CM)
Worked example
| Total fixed costs (TFC) | $250,000 |
| Contribution margin (CM) | $60 |
| Break-even (BEQ) | ≈ 4,167 units |
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