The Break-Even Point: The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
Units
Break even point is a point at
which total costs just equal or break even with sales. This is the activity point at which
neither profit is made nor loss is incurred. Break even point of an enterprise/firm is a point where total revenue/sale
proceeds/sale or output equals total cost. It indicates that level of
output/sales/sale proceeds/revenue at which the firm recovers all its costs and neither earns a profit nor incurs any loss.
In other words, this is a point of zero profitability. Once the
firm/enterprise crosses its break even point, it starts earning profit.
Break even point can be seen from
the following example:
|
Output |
Total cost |
Total revenue/sales/sale proceed |
Profit |
|
200 units |
Tk. 700 |
Tk. 600 |
Tk -100 i. ., loss |
|
300 units |
Tk. 900 |
Tk. 900 |
0 |
|
400 units |
Tk.l 100 |
Tk. 1200 |
Tk.100 |