03 / Business scenario
Price, volume and break-even
How do price and acquisition cost change the sales hurdle for one product?
Demonstration · Synthetic inputs. Every commercial price, cost and volume below is hypothetical. Computed figures are arithmetic on those inputs, not observed market facts or forecasts.
Official sources provide selected context and the calculation method. This is an authored example, not a client report or a live analysis run.
Conclusion under these assumptions
At the assumed $48.00 net price, 50 orders cover the listed costs. A higher price lowers the arithmetic hurdle, but the best price remains unknown without demand evidence.
What to do
Use the table to identify prices worth testing, then replace costs with your data. Compare contribution across observed volumes before choosing a price.
Key evidence
Computed demonstration, conditional on synthetic inputs.
- Holding $38.00 variable cost and $500.00 fixed cost constant, $40.00, $48.00 and $56.00 prices require 250, 50 and 28 whole orders respectively.
- At 50 orders those prices produce −$400.00, $0.00 and $400.00 after the listed fixed cost. These are conditional calculations, not forecasts.
- At the $48.00 price, $20.00 acquisition cost leaves no positive contribution and no finite break-even under this model.
What this does not establish
- All prices, costs, order volumes and the planning horizon are synthetic inputs. Costs are held constant across prices and volumes to isolate arithmetic, not because real costs are constant.
- No price elasticity, conversion rate, forecast probability or optimum price has been estimated. A higher price can reduce orders enough to lower total contribution.
- Net revenue excludes indirect taxes. The model omits owner pay, general overhead, financing, extra compliance costs and inventory cash timing; it is not a full accounting profit or cash-flow forecast.
When to revisit
- Replace price, all variable costs, fixed costs and feasible volumes with your dated inputs before using the result.
- Recalculate when discounts, acquisition costs, shipping brackets or returns change. Separate variable and fixed parts of mixed costs.
- Validate volume at each price using an appropriate customer test. Stop treating the constant-volume comparison as informative if volumes differ.
Inputs and calculations
One order contains one unit. The planning window is a synthetic 45-day pilot; fixed costs cover that entire window. All per-order costs are held constant, with no capacity step, discounts or repeat-purchase effects.
| Input | United States (USD) |
|---|---|
| Net selling price | $48.00 |
| Landed product | $16.00 |
| Packaging | $2.00 |
| Fulfillment and outbound shipping | $5.00 |
| Payment processing | $2.00 |
| Expected returns and damage allowance | $3.00 |
| Customer acquisition per order | $10.00 |
| Fixed cost for the whole pilot | $500.00 |
| Market | Variable cost / order | Contribution / order | Whole orders to cover fixed cost |
|---|---|---|---|
| United States | $38.00 | $10.00 | 50 |
| Synthetic net price | Contribution / order | Break-even orders | Result at 50 orders |
|---|---|---|---|
| $40.00 | $2.00 | 250 | -$400.00 |
| $48.00 | $10.00 | 50 | $0.00 |
| $56.00 | $18.00 | 28 | $400.00 |
| Synthetic acquisition / order | Contribution / order | Break-even orders | Result at 50 orders |
|---|---|---|---|
| $10.00 | $10.00 | 50 | $0.00 |
| $15.00 | $5.00 | 100 | -$250.00 |
| $20.00 | $0.00 | No finite break-even | -$500.00 |
| Synthetic order volume | Net revenue | Listed variable costs | Result after listed fixed cost |
|---|---|---|---|
| 25 | $1,200.00 | $950.00 | -$250.00 |
| 50 | $2,400.00 | $1,900.00 | $0.00 |
| 100 | $4,800.00 | $3,800.00 | $500.00 |
Method and rounding
Variable cost is the sum of the six listed per-order components. Contribution per order = net price − variable cost. Break-even orders = fixed cost ÷ positive contribution, rounded up to a whole order. Result at a given volume = orders × contribution − listed fixed cost.
At zero or negative contribution there is no finite break-even for the positive fixed costs here. Prices and costs are stored and computed as integer cents; the display uses two decimals. SBA describes the single-product break-even method.
The returns allowance is an assumed expected cost per original order, not a return-rate estimate. The model assumes it captures lost revenue and net reverse-logistics costs; replace it with consistent actual cohort data, avoiding double counting.
Sources
Official context is separate from the synthetic commercial inputs. No source below supplies the prices, costs or sales volumes in this example.
Official context · U.S. Small Business Administration
Plan your business — break-even analysisFixed costs divided by price less variable cost gives break-even units. We round upward to whole orders.
Scope limit: A cost model does not measure demand, conversion or the probability of reaching that volume.
United States; calculation method · Orders for a single product
Undated live guidance; checked 31 October 2026. Checked 2026-10-31.
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