Business
Break-even revenue
Fixed costs divided by the contribution margin ratio. This is the form to use for service businesses and mixed product lines.
The Formula
Break-Even Revenue = Fixed Costs / ((Price - Variable Cost) / Price)
Fixed costs divided by the contribution margin ratio. This is the form to use for service businesses and mixed product lines.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| (P - VC) / P | Contribution margin ratio | ratio | Share of each revenue dollar left after variable costs. 0.60 means sixty cents of every dollar covers fixed costs and then becomes profit. |
What Each Symbol Means
(P - VC) / Pratio
Contribution margin ratio
Share of each revenue dollar left after variable costs. 0.60 means sixty cents of every dollar covers fixed costs and then becomes profit.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate the break-even point page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate The Break-Even Point, filed under Finance. Every number the guide produces comes from substituting into this one line.