Break-Even Point:


Where sales or revenue equals expenses is known as the break-even point. This is also the point where there is no profit or loss. The break-even point is important for anyone mangaing a business, because this is the limit in which the company will begin either gaining or losing revenue.

Another way to describe the break-even point is the point where a firm produces the number of units that ends up with an economic profit of zero, taking into account total costs. Its the point where the company stops costing money and starts producing money. In the graph below the break-even point is at 400 pictures and $40 thousand. Anywhere below that point the company is at a loss (green), and anywhere above that point the company is making a profit (red).


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Video:



This video is an analysis of multiple graphs to find the break even point.


Links:

The Break-Even Point - A helpful analysis of the break-even point
Break-Even Calculator - If you want to calculate your own break-even point
How to Lower Your Break-Even Point- Tips for Business owners



Practice Question:

The break-even point is the point where sales revenue equals :
a) expenses
b) total revenue
c) fixed costs
d) zero



Answer:

The answer is A: expenses