Calculating BreakEven Mathematically using
the CONTIBUTION method


This method uses a simple formula to work out how much
each unit produced and sold contributes to the covering of
FIXED COSTS.

By calculating the contribution of each product to fixed costs
is possible to know how many units will need to be produced
and sold to cover all the fixed costs and therefore breakeven.

The formula


Breakeven = Fixed costs
Selling price variable costs



E.g.
selling price =15
variable costs per unit of 11.
Fixed costs = 20,000

Therefore 20,000 = 5,000 units
15- 11