What equation represents the break-even calculation in terms of months?

The break-even calculation is essential for determining the point at which total revenues equal total costs, meaning that a business is neither making a profit nor incurring a loss. To find the break-even point in terms of months using a formula, the correct approach is to consider only the fixed costs and the contribution margin.

The contribution margin is calculated by subtracting the variable costs from the revenue. Thus, the appropriate equation for finding the break-even point involves dividing the total fixed costs by the contribution margin (monthly revenue minus variable monthly costs). This gives the number of months required to recover the initial investment of fixed costs through monthly profits generated after covering the variable costs.

By using this formula, you clearly identify how many months it will take for the business to become profitable by understanding that fixed costs need to be recouped through the contribution margin earned each month. This approach captures the critical elements necessary for a break-even analysis in a straightforward manner.