How to interpret the breakeven point in units?
The formula for calculating breakeven point in units is to take total fixed costs and divide by contribution margin per unit. Contribution margin per unit is calculated as revenue per unit minus variable costs per unit.
The output of this formula will tell the company exactly how many units they need to sell to cover their fixed costs. If they end up selling more units, they will generate a profit, and if they sell less units, they will incur a loss. For example, if the breakeven point in units is 100 units, and the company will sell more than 100 units, they will generate a profit. If they sell less than 100 units, the company would generate a loss.
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