Contribution margin at the break-even point is the amount each client “contributes” toward paying for overhead and generating a profit. Understanding the break-even point is crucial for planning sales, production, and other costs to sustain the business. To find it, we need to know the product price, variable costs that change in proportion to sales, and fixed costs that remain constant. Calculating the break-even point is straightforward. Just remember, its Total fixed cost divided by the contribution margin ratio.

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