Break-even point definition:
A break-even point is the level of output at which total revenue equals total cost, and both are equal to zero. It is a concept used in accounting and business management to analyze what happens when there are no profits or losses for a company. A firm reaches this equilibrium position where normal profit occurs when it produces the quantity that maximizes its total revenue minus its total cost.
This article will discuss how firms reach this break-even point through an analysis of marginal costing, average costs, aggregate production functions, and more!
A firm’s break-even point can be calculated by dividing fixed expenses by expected sales volume (sales .times price), producing two variables.