Understanding of Break-even Point

1. Break-even Point l is a level where the business does not earn any profit or does not suffer losses.

2. At break Even point, the total sales revenue equals the total cost and profit is zero.

3. The Break-even Point may be shown in sales units or sales value (ringgit term).

4. The Break-even Point graph shows the relationship between revenue, cost, profit, or loss at each stage of production.

5. The firm’s management uses a breakpoint analysis to evaluate a business project whether the project will generate profit or not. Firms will gain profit if expenditures exceed the break-even point and otherwise incur losses if less than the break-even point.