Break Even Point

What is Break even point? (also known as Break even level of output)
Break even point is the level of sales at which total costs=total revenue.
 BEP Chart
• BEP cahrts are graphs
which show how costs
and revenues of a
fit
business change with Pr o

sales.
• They show the level of
sales the business must SS
LO
make in order to break
even.
Advantages and Disadvantages of BEP
• Able to read the expected profit
or loss
• Can make the owners/ investors
to consider the business to
invest in this business or to
improve the business
• Show BEP
• Show safety margin
• Assume no inventories
• Straight line assumption
• Fixed costs not
alwaysoonstant
• Concentrate on break even
Total fixed costs
Break even point=
Selling price-Variable Cost
Selling price-Variable Cost = Contribution per unit
E.g. of BEP