How it is calculated
Contribution margin = price − variable cost Break-even units = fixed costs ÷ contribution margin Break-even revenue = break-even units × price Units for target profit = (fixed costs + target) ÷ contribution marginFixed costs do not change with sales (rent, salaries, subscriptions); variable costs rise with each unit (materials, packaging, commissions).
Worked example
A café with 30,000 monthly fixed costs sells coffee at 20 with a variable cost of 6: contribution 14, break-even = 30,000 ÷ 14 ≈ 2,143 cups a month, about 72 a day.
Frequently asked questions
What is contribution margin?
What each unit leaves after its variable cost, used to cover fixed costs and then profit.
What if I sell several products?
Use a weighted average price and variable cost by each product’s sales mix.
How do I lower my break-even point?
Raise prices, cut variable costs, or reduce fixed costs.