Break-even refers to the point at which total revenue equals total costs, meaning a business is neither making a profit nor a loss. It is a critical financial measure used to determine how much must be sold to cover fixed and variable costs.
The break-even point helps businesses understand the minimum sales volume required to sustain operations. It is typically calculated using the formula:
Break-even volume = Fixed Costs ÷ (Selling Price per Unit – Variable Cost per Unit)
Knowing the break-even point supports pricing, budgeting, and forecasting decisions, and is especially important when launching new products or entering new markets.