Define break-even point.

Define break-even point.

Ans. Break-even point is of particular importance in case of Break-even analysis. According to Horngten, “The break-even point is that point of activity (sales volume) where total revenues and total expanses are equal. It is the point of zero profit.”

Break-even point can also be defined as the specific level of activity or volume of sales where the firm breaks even i.e., the total cost equal total revenue. Hence, it is the point where losses stops to take place while profits have not yet begun. When a firm produced sells less than the level of

break-even point, it makes profits. Thus, the break-even point may be taken

as the one indicating the minimum level of production/sales which the company

has to undertake in order to be economically viable.

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