Financial planning · NetSuite TD3016323

Break-Even Analysis

Cost classification, contribution margin, break-even revenue, margin of safety, and operating leverage for the consolidated business, from 24 months of posted activity.

Prepared 2026-09-23 · Subsidiaries 1-3, elimination excluded · Source: NetSuite general ledger and sales lines via SuiteQL · Prompt: Break-Even Analysis Tool, NetSuite AI Prompt Library v1 · Standard Review depth

Executive Summary

Break-even for this business sits between $647,846 and $782,910 of revenue a month, against an average of $1,011,297 over the trailing twelve months. Where it lands in that range depends on how the cost base is classified, and that turned out to be the finding. Read statistically, every cost account in the ledger moves with revenue: 49 of 55 cost accounts correlate with monthly revenue above 0.6 and none behaves like a fixed cost. Read structurally, with cost of goods treated as variable and operating expenses as fixed, the business has a 39.9% contribution margin, $258,692 a month of fixed cost, and a margin of safety of 35.9%.

The statistical read isn't credible for a real business, because rent, insurance, and salaries don't scale with sales month to month. It happens here because 85% of revenue and most of cost of goods are posted by a monthly journal series that moves in step, so the ledger's cost behavior is an artifact of how it was seeded. The prompt's rule that cost classification decisions go to a person applies with full force: the structural model is the one to plan on, and it says the business clears break-even by about a third, with operating leverage of 2.8x.

Cost Classification

Method: each cost account's 24 monthly totals were tested for variability (coefficient of variation) and for correlation with monthly revenue. Accounts with correlation above 0.6 and variation above 15% are classed variable; below 15% variation, fixed; the rest mixed. The result is 49 variable, 6 mixed, 0 fixed. The largest accounts are below, with their behavior. Every account, including rent and salaries, shows the same 22 to 25% variability and the same correlation, which is the signature of a ledger seeded by formula rather than by operations.

The structural classification treats the three cost of goods accounts (purchases, cost of sales, third-party contracting) as variable and every operating expense account as fixed. It is a judgment, and the prompt requires that a person confirm it before the break-even figure is used for a volume target or a pricing decision.

Contribution Margin Analysis

Basis: invoices and cash sales over the trailing twelve months, with the cost estimate carried on each line as the variable cost. Journal-posted revenue carries no line detail and is excluded here. Contribution margin by product class:

Product classes cluster between 42% and 44%, which is consistent with the structural model's 40% at the ledger level once delivery service, which carries no cost estimate, is set aside. Delivery service is 37% of billed revenue and shows a 100% margin only because its cost is not captured on the line; the true contribution of that service is unknown from this data and is flagged.

Break-Even Results

Break-even in units is not meaningful for a multi-product business with a service line, so the report stops at revenue. At the structural model's figures, a 10% fall in revenue would cut operating income by about 28%.

Monthly revenue (blue) against total cost of goods plus operating expense (gray), 23 months of posted activity. The two lines track each other closely because both are dominated by the journal series.

Sensitivity Analysis

Based on: the structural model at the trailing twelve-month average. Optimistic is volume up 20% and price up 5%; pessimistic is volume down 20% and unit cost up 10%.

The pessimistic case stays above break-even by a narrow margin, which is what a 36% margin of safety means in practice: the business survives a bad quarter, and would not survive two of them if costs held.

Appendix: Data Lineage

Adaptations from the prompt's templates: amounts come from transactionaccountingline by posting period, not transactionline.amount by transaction date, so that they reconcile to the ledger; transaction.subsidiary is not exposed to SuiteQL, so the elimination subsidiary is excluded through the line; the cost estimate on sales lines is stored negative in this account and was sign-corrected; the prompt's expense-variability query uses a nested subquery form that SuiteQL rejects, so the variability statistics were computed in code from the monthly series.

SELECT ap.periodname, ap.startdate, a.id, a.acctnumber, a.fullname, a.accttype, SUM(-tal.amount) AS amt
FROM transactionaccountingline tal JOIN transaction t ON t.id = tal.transaction
JOIN transactionline tl ON tl.transaction = tal.transaction AND tl.id = tal.transactionline
JOIN account a ON a.id = tal.account JOIN accountingperiod ap ON ap.id = t.postingperiod
WHERE tal.posting = 'T' AND a.accttype IN ('Income','COGS','Expense','OthIncome','OthExpense') AND tl.subsidiary <> 4
  AND ap.isquarter = 'F' AND ap.isyear = 'F' AND ap.startdate >= DATE '2024-09-01' AND ap.enddate <= DATE '2026-08-31'
GROUP BY ap.periodname, ap.startdate, a.id, a.acctnumber, a.fullname, a.accttype

-- DL-002: same, grouped by ap.periodname, t.type, restricted to accttype = 'Income'

SELECT t.trandate, tl.item, BUILTIN.DF(tl.class), -tl.quantity, -tl.netamount, tl.costestimate
FROM transaction t JOIN transactionline tl ON tl.transaction = t.id JOIN item i ON i.id = tl.item
WHERE t.type IN ('CustInvc','CashSale') AND t.posting = 'T' AND tl.mainline = 'F' AND tl.taxline = 'F' AND tl.subsidiary <> 4
  AND t.trandate >= ADD_MONTHS(SYSDATE, -24)

Appendix: Assumptions and Verification

Confidence: 85% in the structural break-even as a planning figure, conditional on the classification being confirmed; 40% in the statistical model, reported for transparency. Pricing recommendations and volume targets derived from these figures require human review.