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Break-even analysis

Single-product context

1.1 The concept of contribution

Variable costs should include
ALL variable costs – both
production and sales.

Contribution = Selling price – variable costs
Alternatively, total sales revenue

less total variable costs will provide

the total contribution.

Contribution is used in requirements that ask for the break-even point in units.

Contribution per unit Alternatively, use
Contribution ratio = ––––––––––––––––– sales revenue and

Selling price total contribution.

The contribution ratio is used in requirements that ask for the break-even point in $.

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