Accounting terms

Dictionary of all accounting terms

What is a Break-Even Point?

The Break-Even Point (BEP) is the price point at which the sales revenue is equal to the costs, generating zero profit.

A break-even point is the minimal accepted point for most businesses. Here, the total costs for a product or service and the total revenue that product or service have brought in are equal.

Therefore, there is no profit nor any loss. This type of revenue is needed to cover the total fixed and variable expenses of the company for a specified time period.

How to Calculate Your Break-Even Point

You can calculate how much you need to sell (in dollar or other currency terms) or how many units must be sold in order to break even.

To calculate the BEP in units:

BEP in Units = Fixed Costs / (Sales Price per Unit - Variable Cost per Unit)

To calculate the BEP in Dollars:

BEP in $ = Sales Price per Unit x BEP in Units

You can download a free break-even analysis template here!

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