Build an Excel workbook that documents feasible pricing and target-profit recommendations
In Guided Practice you worked through Sarah's POS service scenario step by step. Now you'll build fluency with contribution margin and break-even calculations by practicing on fresh problems until you can solve them reliably.
Fixed Costs
Monthly costs that don't change with volume
Variable Cost
Cost per unit that scales with sales
Selling Price
Revenue per unit sold
Fixed Costs
$9000
Variable Cost
$600
Selling Price
$1200
Calculate: Contribution Margin ($)
Contribution Margin ($)
Price - Variable Cost
Dollar amount per unit available for fixed costs
Contribution Margin Ratio (%)
(CM ÷ Price) × 100%
Percentage of each sales dollar
Break-Even Units
⌈Fixed Costs ÷ CM⌉
Units needed to cover all costs (round UP)
Break-Even Dollars
⌈Fixed Costs ÷ CM Ratio⌉
Revenue needed to break even
Contribution Margin ($)
CM = Price − Variable Cost
How much each unit contributes to fixed costs
Contribution Margin Ratio (%)
CM% = (CM ÷ Price) × 100
Percentage of each sales dollar available for fixed costs
Break-Even Units
BE = ⌈Fixed Costs ÷ CM⌉
Units needed to cover all costs (always round UP)
Break-Even Dollars
BE$ = ⌈Fixed Costs ÷ CM%⌉
Revenue needed to break even
You've achieved mastery when you can:
- Calculate contribution margin in dollars for any pricing scenario
- Calculate contribution margin ratio as a percentage
- Find break-even in units (always remembering to round UP)
- Find break-even in dollars of revenue
- Explain what each metric tells you about business viability
Coming Up: Assessment
Phase 5 will check whether you can apply these calculations to defend pricing decisions using contribution margin, break-even rankings, and feasibility reasoning.