
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 