Management Accounting · Interactive Lab

The Break-Even Tradeoff

Higher fixed investment buys efficiency — but also raises the sales threshold the firm must clear to earn anything.

Revenue
Total Cost
Fixed Cost
Profit
Loss
Profit at Different Sales Volumes

Model Assumptions
Selling price is held fixed at $100 per unit across all three strategies. Higher investment → lower variable cost per unit, reflecting real-world automation: capital equipment reduces per-unit labor and material costs. Option A (Manual): FC = $20K, VC = $80, CM = $20, BE = 1,000 units. Option B (Hybrid): FC = $120K, VC = $60, CM = $40, BE = 3,000 units. Option C (Automated): FC = $400K, VC = $20, CM = $80, BE = 5,000 units. Break-even units = Fixed Cost ÷ Contribution Margin per Unit.