Each sale must pay its own costs before it helps cover overhead.
Break-even analysis separates costs that continue every month from costs triggered by each sale. Only the amount left after variable costs—the contribution margin—can cover fixed costs and create profit.
Average sale$2,500
Variable cost$1,000
Contribution$1,500
A $1,500 contribution on a $2,500 sale is a 60% contribution margin. At $20,000 in monthly fixed costs, break-even is $33,333.33 in revenue.