Break-even point
The break-even point is the activity level at which total revenue equals total cost and profit is zero under the specified cost-volume-profit assumptions. For one product with constant positive unit contribution, break-even units = fixed costs ÷ contribution per unit. Break-even revenue = fixed costs ÷ contribution-to-sales ratio. Round required whole-unit sales upward. Changes in price, unit variable cost, fixed cost or product mix can change the result.
Worked example
Fixed costs are $12,000 and unit contribution $6. Break-even is 2,000 units. At price $20, corresponding revenue is $40,000.
Common mistake
If unit contribution is zero or negative, the simple model has no positive sales volume that covers fixed costs. Do not divide fixed costs by selling price.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | PM | Direct | September 2026–June 2027 |