Exploration · Ch 3 · Cost-Volume-Profit Analysis
The Break-Even Explorer.
You’re opening a specialty sandwich food truck. Three numbers decide how many sandwiches you have to sell before you make a dollar: your price, your ingredient cost per sandwich, and your fixed overhead. Slide any of them and watch the break-even point move.
Your three levers
Price / sandwich$12.00
Var cost / sandwich$4.00
Fixed cost / year$60k
Contribution margin / unit
$8.00
66.7% margin ratio
Break-even units
7,500 sandwiches
21.4/day open 350 days
Break-even revenue
$90k
Total sales needed to cover all costs
Cost-volume-profit graph
× = revenue > total cost
What if you sell this many?
9,000 sandwiches
Contribution-margin income statement · 9,000 sandwiches
Revenue$108k
Variable costs−$36k
Contribution margin$72k
Fixed costs−$60k
Operating income$12k
Contribution-margin income statement excludes tax (a Ch 3 simplification). Real decisions also factor in capacity limits, mixed-product break-even, and the assumption that fixed costs stay fixed across the volume range you’re considering.