How the Break-Even Point Is Calculated
Break-even units = Fixed Costs ÷ (Price − Variable Cost per unit). The denominator is your contribution margin: what every sale contributes toward rent, salaries and other fixed costs. Until cumulative contribution covers fixed costs, you lose money; after it, each unit's margin is pure profit.
Example: ₹50,000 monthly fixed costs, ₹500 price, ₹300 variable cost → margin ₹200/unit → break-even at 250 units or ₹1,25,000 revenue. Want ₹40,000 profit? (50,000 + 40,000) ÷ 200 = 450 units.
Two levers move the break-even down: raising price (if the market allows) or cutting variable cost. Cutting fixed costs helps linearly — every ₹200 of fixed cost removed is one fewer unit you must sell.
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