Identify fixed costs
Identify variable cost per unit
Determine selling price per unit
Calculate contribution margin per unit
Use the break-even formula: Fixed Costs ÷ Contribution Margin per Unit
Alternatively, use the break-even formula: Fixed Costs ÷ (Selling Price per Unit – Variable Cost per Unit)
If needed, calculate break-even sales in dollars: Fixed Costs ÷ Contribution Margin Ratio
Check the result by confirming total revenue equals total costs at the break-even point