Which formula correctly computes the break-even point in units when fixed costs F, price per unit P, and variable cost per unit VC?

• A. (P - VC) / F
• B. F / (P - VC)
• C. F / P
• D. F / VC

Answer: (B)

Break-even quantity is the number of units you must sell to cover all costs. At break-even, total revenue equals total costs. Revenue is P times the quantity, and costs are fixed costs plus variable costs per unit times the quantity, so P × Q = F + VC × Q. Solve for Q: (P − VC) × Q = F, which gives Q = F ÷ (P − VC). This shows that each unit adds (P − VC) to covering fixed costs, so the fixed costs must be divided by this contribution margin per unit. For example, if F = 50, P = 10, and VC = 6, the contribution per unit is 4, and break-even occurs at 50 ÷ 4 = 12.5 units, so you’d need 13 units to break even. The other forms don’t match the break-even logic: dividing fixed costs by price ignores variable costs, dividing by variable cost ignores fixed costs, and (P − VC) ÷ F is a ratio, not the quantity needed.