variable cost

Breakeven point is a point at which output sold produces revenue which is equivalent to zero . The company will be interested in the breakeven point in to avoid operating losses . Therefore the breakeven point is determined using the following formula

Breakeven point fixed cost

Contribution margin per unit

Contribution per unit selling price per unit - valuable cost per unit

Contribution is the difference between sales value and the marginal cost of sales . It gives to arise of break even point which can be described as at the point in which the

business makes no lose or profit . It is claimed that contribution is more relevant to management in supply than are costs prepared with a loading for fixed expense . It is pointed out that the loading must , of necessity , vary with the level of output considered . This implies that when trade is bad and output small an attempt to recover all fixed overhead will result in an etitive price . It is accordingly claimed that in practice many opportunities exists of obtaining a contract at a price which makes at least some contribution to fixed expenses , and that therefore a contract so obtained will result in a greater overall net profit than if the contract were not obtained . There are of course dangers in these view and these are dealt with later . Subject to the dangers , there is little doubt that the approach is of value to businessmen , as it...