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Break-even point

The operating level at which the total sales revenue equals the total cost. Total sale revenue is equal to the price per unit times the number of units sold. Total cost equals total variable cost, the number of units sold in time the variable cost per unit and the total fixed cost. Break-even can be calculated either in terms of units sold or the sales revenue. To find the break- even in units, divides fixed costs by the contribution  margin per unit. To find the break-even sale revenue, divide the fixed cost by the contribution margin ratio.

 

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