adamriofc Break-Even Analysis
Determines the sales level where revenue exactly covers fixed plus variable costs — the baseline for pricing and target setting.
Formulas (engines/break-even.js)
- Contribution Margin = Price − Variable Cost per unit.
- Contribution Margin Ratio = CM ÷ Price.
- Break-Even Units = Fixed Costs ÷ CM.
- Break-Even Revenue = Units × Price.
- Margin of Safety = Actual Revenue − Break-Even Revenue.
Multi-Product Note
For multi-product cases, use the weighted-average contribution margin (weights = sales mix composition); the result is an approximation — valid only if the mix stays constant.
Scope & Safety
- Use for: minimum selling price, sales targets, evaluating fixed costs (rent, admin salaries).
- Do not use for: multi-period profit analysis (assumes constant price & costs), or production decisions with limited capacity without constraints.
- Main assumptions: constant price, linear variable costs, all units sold — state the assumptions when presenting.
- The engine throws when price ≤ variable cost (non-positive contribution margin) — that signals an infeasible model, not an error.
Hybrid Execution Model
Pass fixedCosts, pricePerUnit, variableCostPerUnit, actualRevenue to engines/break-even.js; present the 5 outputs plus interpretation. Trust Envelope: risk LOW, as_of assumption date.
Worked Example
Input: fixed 20 million/month, price 25.000, variable cost 15.000, actual revenue 60 million. Output: CM = 10.000; Ratio = 0.40; BEP = 20 million ÷ 10.000 = 2,000 units = 50 million; Margin of Safety = 60 − 50 = 10 million (16.7% above BEP — a thin margin; be cautious when revenue declines).