what is break even point

The break-even point is a term used in economics, business, and specifically cost accounting to describe the point at which total cost and total revenue are equal, meaning there is no net loss or gain, and one has "broken even"). In other words, it is the level of production at which the costs of production equal the revenues for a product. The break-even point is calculated by dividing the total fixed costs associated with production by the revenue per individual unit minus the variable costs per unit. The formula for break-even analysis is as follows: Break-Even Quantity = Fixed Costs / (Sales Price per Unit – Variable Cost Per Unit) . The break-even point is important for businesses to determine the level of sales needed to cover all costs and start making a profit. It is also useful for analyzing costs, evaluating profits at different sales volumes, and proving potential turnaround after disaster scenarios.