I know the numerator for calculating break-even point is Fixed Cost, but is the denominator gross margin or contribution margin? I've seen it done both ways and am very confused which one to use.
gross margin=Revenue-Variable Costs and contribution margin=Price-Cost.
Which one is it?
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Repeat after me:
When the unit sales price is unknown, to find the break-even REVENUE we do the following:
=Fixed costs / Contribution margin
=Fixed costs / Contribution margin
I'm not following. If you don't know price, how would you calculate contribution margin? Seeing that contribution margin=units sales price-unit variable cost.
When you do not know what unit selling price is, you can calculate the amount of revenue needed to break event by: FC/CM Ratio
CM Ratio =/= CM
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