| Unit Contribution Margin (CM) |
$\text{Unit Price} - \text{Unit Variable Cost}$ |
Dollars from each unit sold that cover fixed costs and create profit. |
| Contribution Margin Ratio |
$\frac{\text{Unit CM}}{\text{Unit Selling Price}}$ |
Percentage of every sales dollar available to cover fixed costs. |
| Break-Even (Units) |
$\frac{\text{Total Fixed Costs}}{\text{Unit CM}}$ |
Units required to achieve exactly zero operating income ($0 profit). |
| Break-Even (Sales $) |
$\frac{\text{Total Fixed Costs}}{\text{CM Ratio}}$ |
Total sales dollars needed to cover all fixed and variable costs. |
| Target Profit (Units) |
$\frac{\text{Fixed Costs} + \text{Target Profit}}{\text{Unit CM}}$ |
Volume required to produce a specific desired operating profit. |
| Margin of Safety |
$\text{Current Sales} - \text{Break-Even Sales}$ |
Cushion before the company drops into operating losses. |