Cost Accounting
Break-even volume
How many units cover the cost of keeping the lights on?
Practise break-even volume with a worked example and a short check.
Every sale contributes its price minus variable cost toward fixed costs.
Break-even units = fixed cost ÷ (unit price − variable cost)
Every unit contributes its price less variable cost. ₹60,000 ÷ (₹500 − ₹300) = 300 units. If contribution is zero or negative, more units cannot cover positive fixed costs.
₹60,000 fixed cost, ₹500 price and ₹300 variable cost give 300 units.
Every unit contributes its price less variable cost. ₹60,000 ÷ (₹500 − ₹300) = 300 units. If contribution is zero or negative, more units cannot cover positive fixed costs.
Variable cost rises to ₹350. How many units now break even?