Price for Break-Even, Profit, and Customer Value

Build the cost model before solving

Break-even analysis asks how many units or how many sales dollars are required for total revenue to equal total cost. At that point profit is zero, not positive. Define one unit first: a meal, tray, counseling visit, class seat, subscription, contract, or another billable service. Use one time period and one activity range throughout the problem. Fixed costs remain constant in total within the relevant range, such as monthly rent, a salaried manager, base software, or depreciation. Variable costs change with activity, such as ingredients per meal, payment processing per sale, disposables, or hourly labor added for each visit. Mixed costs contain both portions and should be separated when the question supplies enough information. A cost can behave differently under another decision or timeframe. Salaried labor may be fixed for the next month but avoidable when a yearly contract ends. Include only costs relevant to the decision and do not mix cash flows, accounting allocations, and incremental costs without explanation. Capacity matters because a simple linear model assumes the selling price and unit variable cost remain stable and that fixed costs do not step upward. If a second kitchen shift becomes necessary after 1,400 meals, a calculation at 1,600 meals must include the new fixed-cost tier.