Question 1

What is a break-even point?

Accepted Answer

It is the sales level at which total revenue equals the costs included in the calculation, producing neither profit nor loss under those assumptions.

Question 2

What is contribution per unit?

Accepted Answer

It is selling price per unit minus variable cost per unit. That contribution first covers fixed costs and then contributes to profit.

Question 3

What happens if variable cost is equal to or higher than price?

Accepted Answer

There is no positive contribution per unit, so increasing sales will not cover fixed costs under those inputs.

Question 4

Should fixed costs and sales use the same period?

Accepted Answer

Yes. Monthly fixed costs should be compared with monthly sales assumptions, and annual fixed costs with annual assumptions.

Question 5

Can I use this for several products?

Accepted Answer

A weighted-average contribution approach may be needed when products have different prices, costs, and sales shares. A single-product result may be misleading.

Question 6

Is break-even the same as positive cash flow?

Accepted Answer

No. Credit terms, inventory purchases, loan payments, taxes, capital spending, and timing differences can make cash flow different from accounting break-even.

Break-even Calculator

How to Calculate Break-even in 4 Steps

Choose one period.

Enter fixed costs.

Enter price and variable cost.

Review the result.