Break-even analysis and contribution margin
When every sale starts to count
Try the interactive lessonLet’s make it simple.
Contribution margin is selling price minus variable cost. It helps cover fixed costs. Break-even units = Fixed costs ÷ Contribution margin per unit.
Picture this.
A smoothie sells for $10 and costs $6 to make. Each sale contributes $4 toward $200 of fixed rent. Sell 50 smoothies to break even: $200 ÷ $4 = 50.
Check your understanding
A smoothie sells for $10, variable cost is $6, and fixed costs are $200. How many smoothies must you sell to break even?
Think it through, then reveal the explanation
Each smoothie contributes $10 − $6 = $4. Divide $200 of fixed costs by $4: 50 smoothies. At 50 units, revenue and total costs are both $500.
Build the bigger picture.
- Find selling price per unit
- Subtract variable cost per unit
- Find total fixed costs
- Divide fixed costs by contribution margin
Work out what each sale contributes before calculating how many sales you need.
Now make it move.
Bring this idea to life with interactive practice, a 3D illustration and tips along the way. Your progress stays on your device.
Practice The Break-even Point