Case Math · Interview Question
$2M fixed costs, product sells at $50 with $30 variable cost per unit. What's breakeven volume?
How to answer
Contribution margin per unit is $50 - $30 = $20. Breakeven units = fixed costs / contribution margin = $2M / $20 = 100,000 units. At $50 each that's $5M in breakeven revenue. I'd then compare that to current volume to see how far the client is from profitability.
Key idea: Dividing fixed costs by price ($50) instead of contribution margin ($20) - that ignores variable costs and understates breakeven.
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