The concept explains the relationship between cost volume and profits at various levels of activity, it reviews different methods for calculating the break-even point and presents useful evidence on how the break-even analysis has been used through real case examples.
Break-Even Analysis Definition
Break-even analysis establishes the point at which total revenue equals total costs (Needles et al., 2010). It is expressed as the sales quantity (in units) and revenue at which the company or project will start making profits. At the break-even point of sales the company has covered both fixed costs and also the variable costs associated with those sales, and hence any further sales associated with the project, investment or indeed company will yield a net profit.
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Examples of Break-Even Analysis *
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Break-Even Analysis References (4 of up to 20) *
- Agarwal, R.D. (1983) Organization and Management. Tata McGraw-Hill Education.
- Airline Business (2004) BA Expects to Break Even in Europe. Mar, 20(3), p.16.
- Austin, E.H., Edmonds, H.L., Auden, S.M., Seremet, V., Niznik, G., Sehic, A., Sowell, M.K., Cheppo, C.D., Corlett, K.M. (1997) Benefit of Neurophysiologic Monitoring for Pediatric Cardiac Surgery. The Journal of Thoracic and Cardiovascular Surgery, 114(5), pp.707-717.
- Brealey, R.A., Myers, S.C. (2003) Capital Investment and Valuation. McGraw-Hill Professional.
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