What is the difference between fixed and variable costs?
Fixed costs (rent, insurance, salaries) stay constant regardless of volume; variable costs (raw materials, packaging, shipping) rise with production.
Units you need to sell to cover fixed and variable costs.
Calculates the exact unit sales volume and revenue required for a business to cover all fixed and variable operating costs with zero profit and zero loss.
Break-Even Units = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)
Contribution Margin = Selling Price - Variable Cost. Break-even occurs when total contribution margin equals total fixed overhead.
Inputs: Fixed Overhead = ₹50,000/month | Selling Price = ₹500/unit | Variable Cost = ₹300/unit
Summary: Fixed Costs = ₹50,000 | Margin = ₹200/unit | Break-Even Volume = 250 Units | Break-Even Sales = ₹1,25,000
Fixed costs (rent, insurance, salaries) stay constant regardless of volume; variable costs (raw materials, packaging, shipping) rise with production.
Selling price minus variable cost per unit; it is the amount of money each unit sale contributes toward paying off fixed costs.
By raising selling prices, reducing unit material costs, or trimming fixed operational overhead.