Module 117 min2002 wordsFree — no account
Break-even point and break-even date
The module’s worked examples, then cases to attempt before revealing their solution · 2 sections · 364 words · 3 min
Worked example
The same turnover, two opposite exposures
Two workshops invoice 480 000 € and post 12 000 € of result. The first carries 252 000 € of fixed charges with a contribution margin rate of 55 %: its threshold is 458 182 €. The second carries 96 000 € of fixed charges with a rate of 22,5 %: its threshold is 426 667 €. If activity falls 10 %, the first loses 26 400 € of margin and swings to a 14 400 € loss; the second loses only 10 800 € and stays profitable at 1 200 €.
Practical case
Can the hire be afforded?
Nadia's workshop is considering hiring a permanent worker at 42 000 € a year including employer contributions. Its current structure: 480 000 € of turnover, 216 000 € of variable charges, 252 000 € of fixed charges, 12 000 € of result. Compute her contribution margin rate, her current break-even point, then the new threshold after the hire. Finally, say by how much turnover must grow to restore a 12 000 € result.
Hint: An extra fixed charge does not change the contribution margin rate. It only moves the numerator of the break-even calculation.
Show the solution
Contribution margin: 480 000 − 216 000 = 264 000 €, a rate of 264 000 / 480 000 = 55 %. Current threshold: 252 000 / 0,55 = 458 182 €. After the hire, fixed charges become 252 000 + 42 000 = 294 000 €, and the new threshold is 294 000 / 0,55 = 534 545 €, some 76 364 € higher. Nadia invoices 480 000 €: with an unchanged structure she would fall below her threshold and post a 30 000 € loss. To restore a 12 000 € result she must cover 294 000 + 12 000 = 306 000 € of margin, which needs turnover of 306 000 / 0,55 = 556 364 €. The required growth is therefore 76 364 €, close to 16 % of additional activity.
Answer: Margin rate 55 %, current threshold 458 182 €, new threshold 534 545 €; turnover of 556 364 € is needed to restore a 12 000 € result, close to 16 % growth.
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