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asked in Economics by (89 points)

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The break-even point can be defined as a point where total costs (expenses) and total sales (revenue) are equal. Break-even point can be described as a point where there is no net profit or loss. The firm just “breaks even.” Any company which wants to make abnormal profit, desires to have a break-even point. Graphically, it is the point where the total cost and the total revenue curves meet.

Calculation(formula)

Break-even point is the number of units (N) produced which make zero profit.

Revenue – Total costs = 0

Total costs = Variable costs * N + Fixed costs

Revenue = Price per unit * N

Price per unit * N – (Variable costs * N + Fixed costs) = 0

So, break-even point (N) is equal

N = Fixed costs / (Price per unit - Variable costs)

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