What is the BEP (Break-even point)?

The break-even point or Break-even analysis can be defined as a point where total costs (expenses) and total sales (revenue) are equal. Break-even point can be described as a point where there is no net profit or loss. The firm just “breaks even.” Any company which wants to make abnormal profit, desires to have a break-even point. Graphically, it is the point where the total cost and the total revenue curves meet.

Break-even point is a financial tool which helps a company to determine the company will be profitable or not.

Formula of BEP

BEP = Total Fixed Cost/PV Ratio

PV Ratio = Contribution/Sale*100

Contribution = Sale – Variable Cost

Example of how to calculate BEP