Technical definition
The activity level at which total revenue equals total cost and operating profit is zero.
How it works
Break-even units equal fixed costs divided by unit contribution margin. The model assumes stable price, unit variable cost, fixed cost and sales mix within a relevant range.
Everyday example
Fixed costs 20,000 and contribution margin 40 per unit imply break-even at 500 units.
Common pitfall
The formula is a simplified planning model; capacity steps, uncertainty and changing sales mix can alter the result.