Costing
Break even units
Volume at which total contribution equals total fixed cost, so the business breaks even.
The Formula
units = fixed costs / (P - V)
Volume at which total contribution equals total fixed cost, so the business breaks even.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| Q | Break even units | count | Units needed to cover fixed costs. |
| F | Fixed costs | currency | Costs that do not vary with volume. |
| P | Price | currency | Selling price per unit. |
| V | Variable cost | currency | Cost that varies with each unit. |
What Each Symbol Means
Qcount
Break even units
Units needed to cover fixed costs.
Fcurrency
Fixed costs
Costs that do not vary with volume.
Pcurrency
Price
Selling price per unit.
Vcurrency
Variable cost
Cost that varies with each unit.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate contribution margin 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 Contribution Margin, filed under Business. Every number the guide produces comes from substituting into this one line.