Business, finance and operations
Break-even point
The level of sales at which total revenue equals total costs, so there is neither profit nor loss.
- Business, finance and operations
Definition
The level of sales at which total revenue equals total costs, so there is neither profit nor loss. It can be stated in units or in revenue.
Also called
Break-even
For your role
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Why it matters
It tells you how much you must sell before making a profit, and how far sales can fall before a loss.
Where it is used
Business plans, pricing decisions, new product launches and scenario planning. Used by management accountants, FP&A analysts, founders and product managers.
How to calculate it
Break-even units = fixed costs ÷ contribution per unit
Break-even revenue = fixed costs ÷ contribution margin ratio
Margin of safety = actual revenue - break-even revenue
Worked example
Raket Parts B.V. Q3 2025, treating direct costs as variable: fixed costs = total costs €16,156,965 - direct costs €5,969,562 = €10,187,403. Contribution margin ratio = 67.7%. Break-even revenue = €10,187,403 / 0.677 = about €15.05 million for the quarter. Actual revenue was €18,476,412, so the margin of safety is about €3.43 million, or 18.5% of revenue.
Raket Parts B.V. is a fictional company created for Insyt.
Definitions vary. The result depends on how costs are split into fixed and variable, which is a judgement. Check how your organisation calculates it.