Question

If the Break Even is negative should you move forward? What are your alternatives?

Answer 1

Negative break even arises when the contribution margin is negative. It means that, the variable costs are more than the price.

In such a situation the total loss increases with every unit produced and sold and there is no chance to recover any part of the fixed costs.

Unless there are measures that can be taken to increase the price and/or to decrease the variable cost, to such an extent as to make the contribution margin positive, it would not be worthwhile going forward.

It the CM cannot be improved it is better to sell off the unit.