Break even

• A business will always want to know how many products (or services) they need to sell in order to cover their costs. This is normally the bare minimum a business will aim to achieve.

  When a business is breaking even, there is no profit and no loss (revenue = total costs).
• break even output

  Break-even Output = Fixed Costs divided by the Contribution Per Unit.
• The difference between the selling price per unit and the variable cost per unit is known as the contribution towards covering the business’s fixed costs.
• break even chart


  fixed costs are always a horizontal line.

  Total cost never start from zero

  Variable costs and revenue start from zero

  
• margin of safety


  is the difference between output level (when output is above break-even) and break-even output.
• Margin of Safety = Actual Sales – Break Even Quantity