Break-even analysis shows the relationship between the costs and profits with sales volume. The sales volume which equates total revenue with related costs and results in neither profit nor loss is called the break-even volume or break-even point (BEP). If all costs are assumed to be variable with sales volume, break-even point would be at zero sales. If all costs were fixed, profits would vary disproportionately with sales and the BEP would be at a point where total sales revenue equalled fixed costs. In other words, the no-profit-no-loss point is BEP at which losses cease and beyond which profits begin.
BEP = Fixed cost/(Sales price – unit variable cost)
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