Formula and example
How it is calculated
Previous total contribution = number of units × (old price − old variable cost). Required new number of units = previous total contribution / (new price − new variable cost), rounded up to the nearest whole unit.
Worked example
With 1,000 units, a net selling price of 10,000 currency units and a variable cost of 6,000 per unit, total contribution is 4,000,000. At a price of 11,000 with unchanged variable cost, 800 sales are enough: a 20% fall in units sold preserves the same total contribution.
Things to check
- Contribution is the difference between sales revenue and variable cost; fixed costs have not yet been deducted. The calculation assumes identical fixed costs. It does not predict sales trends. A negative drop threshold means a volume increase is required. We round down the scenario's number of units.
- The starting values are illustrative examples. Enter your own data on a consistent cost basis. The result is a conditional calculation; it does not model taxation or future market changes.
- Use one currency throughout. Amounts are illustrative currency units, not a currency conversion or a provider quote.
Frequently asked questions
Why don't we keep sales revenue constant?
Identical sales revenue with different variable costs leaves a different contribution. This tool compares the money left to cover fixed costs and profit.
What happens with zero or negative unit contribution?
With positive previous contribution and zero or negative new unit contribution, there is no finite sales threshold to maintain the old contribution. We do not interpret the loss tolerance metric for non-positive previous unit contribution; we still calculate the actual contributions.