A worked example: ₹5,00,000 fixed costs, ₹250 price, ₹150 variable cost
A business with ₹5,00,000 in fixed costs, selling at ₹250 per unit with a variable cost of ₹150 per unit, needs to sell 5,000 units to break even — generating ₹12,50,000 in revenue at that point.
The formula: fixed costs ÷ contribution margin
Contribution margin = price per unit − variable cost per unit: ₹250 − ₹150 = ₹100. This is how much each unit sold actually contributes toward fixed costs, after its own variable cost is covered. Break-even units = fixed costs ÷ contribution margin: ₹5,00,000 ÷ ₹100 = 5,000 units. Break-even revenue is simply that many units at the selling price: 5,000 × ₹250 = ₹12,50,000.
Why contribution margin is the number that matters
A ₹250 selling price sounds larger than a ₹150 variable cost by ₹100 either way — but that ₹100 gap, not the ₹250 price itself, is what actually pays down the ₹5,00,000 fixed cost pile. A business with a smaller contribution margin needs proportionally more units to cover the same fixed costs.
When break-even is mathematically impossible
If variable cost per unit ever equalled or exceeded the price per unit, every sale would lose money (or contribute nothing) regardless of volume — there would be no number of units that could reach break-even, since the denominator would be zero or negative.