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Contribution margin and break-even

The contribution margin per unit is the price minus variable cost per unit — what is left to cover fixed costs and generate profit. Break-even is the number of units where the contribution margin exactly covers fixed costs, i.e. where the business neither loses nor gains.

CM=p−VCCM = p - VCcontribution margin per unit
Q0=FCp−VCQ_0 = \frac{FC}{p - VC}break-even quantity

Symbols

ppselling price per unitkr
VCVCvariable cost per unitkr
FCFCfixed costskr
Q0Q_0break-even quantityunits

Example

FC=50.000FC = 50.000 kr, p=500p = 500 kr, VC=250VC = 250 kr:

Q0=50000/(500−250)=200Q_0 = 50000/(500-250) = 200 units.

Below break-even quantity the business loses money, above it profits — even with the same price and costs.
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Part of Engineering Economics: Costs and profitability.