Break-Even Point

Business Finance

Break-even point is the level of sales where total revenue equals total costs — zero profit, zero loss. Calculated as Fixed Costs / Contribution Margin per Unit. A business with $50,000 fixed costs and $20 contribution margin per unit breaks even at 2,500 units sold. Below break-even = losing money; above = profitable. Key for pricing decisions, capacity planning, and evaluating new product viability. Break-even analysis assumes linear costs and revenues; real businesses face stepped costs (hiring more salespeople) and pricing tiers. Cash break-even differs from accounting break-even — startups with deferred revenue may have positive cash flow while showing accounting losses.