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

2565 Views

See similar Business Studies A Level tutors

Related Business Studies A Level answers

All answers ▸

Analyse two reasons why a business such as The Pentland Group may have chosen to expand through takeovers.


What is the difference between qualitative and quantitative market research?


Analyse the benefits for a national firm of a government adopting protectionist trade policies?


What are Michael Porter's Generic Strategies?


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