What is break even and why is it used?

Break even is the point in which total revenue and total costs ( fixed and variable) are the same. At this point no loss or profit is made, the company ' breaks even'. 

It is used by managers as a simple, quantitive tool to asses whether the revenue from a product is able to cover the production costs. 

It also helps to evaluate the estimated future demand of a product. For example, if the estimated demand lies above the break even point, it shows that a loss is likely to be made. They then may consider options such as discontinuing or re-pricing the product to increase demand. 

EP
Answered by Emily P. Business Studies tutor

2546 Views

See similar Business Studies A Level tutors

Related Business Studies A Level answers

All answers ▸

What is the difference between a strategy and a tactic?


In what way does the seasonality affect operations of a busness?


explain porters five forces and how they encourage or discourage a business to join a market?


What is meant by the term 'gearing'?


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2025 by IXL Learning