Overview

The break-even point (BEP) or break-even level represents the sales amount—in either
unit (quantity) or revenue (sales) terms—that is required to cover total costs,
consisting of both fixed and variable costs to the company. Total profit at the break-even point is zero.

Break-even analysis tells you how many units of a product must be
sold to cover the fixed and variable costs of production. The break-even point is considered a measure of the margin of
safety. Break-even analysis is used broadly,
from stock and options trading to corporate budgeting for various projects.


A break-even analysis results
in neither a profit nor a loss. Instead, it determines the number of sales
needed to cover all variable and fixed costs. It calculates the minimum number
of units to sell and the sales volume needed to pay all expenses before making
a profit.
 

It might not seem like much of a business goal; it's
an 
important reference for your financial people. Your break-even points provide important benchmarks for long-term planning.

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