Break-Even Point
The sales volume at which total revenue equals total costs — where a business stops losing money.
What does break-even point mean?
It’s fixed costs divided by the contribution margin (price minus variable cost per unit). Once you sell beyond the break-even point, each additional sale becomes profit.
Put it to use
Related terms
Break-Even Point — frequently asked
How do I calculate the break-even point?
Divide fixed costs by the contribution margin per unit (price minus variable cost per unit). If fixed costs are $10,000 and each unit contributes $25, you break even at 400 units. Beyond that, each sale is profit.
Why is break-even analysis important?
It shows the sales level where you stop losing money and start earning it, so you can price products, set targets and judge whether a venture is viable before committing. It also reveals how sensitive profit is to costs and volume.