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Breakeven Point - Definition, Examples, and How To Calculate

The document defines the breakeven point as the level of production or sales where total revenues and total costs are equal. It explains that in accounting, the breakeven point is calculated by dividing fixed costs by the revenue per unit minus variable costs per unit. The breakeven point in investing occurs when the market price of an asset equals its original cost.

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Angela Miles Dizon
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185 views1 page

Breakeven Point - Definition, Examples, and How To Calculate

The document defines the breakeven point as the level of production or sales where total revenues and total costs are equal. It explains that in accounting, the breakeven point is calculated by dividing fixed costs by the revenue per unit minus variable costs per unit. The breakeven point in investing occurs when the market price of an asset equals its original cost.

Uploaded by

Angela Miles Dizon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Breakeven Point: Definition, Examples, and How to Calculate

What Is the Breakeven Point (BEP)?


The breakeven point (breakeven price) for a trade or investment is determined by
comparing the market price of an asset to the original cost; the breakeven point is
reached when the two prices are equal.

In corporate accounting, the breakeven point (BEP) formula is determined by dividing the
total fixed costs associated with production by the revenue per individual unit minus
the variable costs per unit. In this case, fixed costs refer to those that do not change
depending upon the number of units sold. Put differently, the breakeven point is the
production level at which total revenues for a product equal total expenses.

KEY TAKEAWAYS

 In accounting, the breakeven point is calculated by dividing the fixed costs of


production by the price per unit minus the variable costs of production.
 The breakeven point is the level of production at which the costs of production
equal the revenues for a product.
 In investing, the breakeven point is said to be achieved when the market price of an
asset is the same as its original cost.
 A breakeven analysis can help with finding missing expenses, limiting decisions
based on emotions, establishing goals, securing funding, and setting appropriate
prices.

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