Break-even point

Break even point is the point of production or output at which expenses or costs are equal to revenue. In other words a point where there is no profit no loss i.e. cost = revenue. The firm is selling or producing the quantity of goods which only cover its costs (both fixed and variable costs) 

TR = TC 


                                     TR = Total revenue,                          TC = Total cost 

Break even point analysis is useful analytical tool for the management of a company because it helps determining the number of goods should be produced to at least cover costs or expense which have been incurred in producing these goods. Break even point is also helpful in calculating the quantity of production which will leads to profit