What is a Break-Even Point?
The **Break-Even Point (BEP)** is the production level or sales volume at which total revenues equal total expenses. At this point, your business is neither making a profit nor suffering a loss. Understanding this number is vital for setting sales targets and determining the viability of your pricing model.
To calculate your break-even point in units, use the following formula:
Break-Even Units = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)
Fixed Costs: Expenses that remain the same regardless of volume (rent, salaries, insurance).
Variable Costs: Costs that increase with production (materials, shipping, direct labor).