# Break-even analysis

**Break-even Analysis** is the pricing-related technique used to determine the minimum sales volume a product must generate at a certain price level so that all prior costs are covered.

Break-even analysis is a determination of how many product units must be sold at various prices for a firm to recover costs and begin making a profit.

Break-even analysis refers to an analysis that determines the unit volume and dollar sales needed to be profitable given a particular price and cost structure.

At the Break-even Point, total revenue equals total costs and profit is zero. Above this point, the company will make a profit; below it, the company will lose money.

A company can calculate break-even volume using the following formula:

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**Break-even Volume = Fixed Costs / (Price – Unit ****Variable Cost****)**

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Break-even analysis is a method of determining the number of units that must be sold at a given price to recover costs and make a profit.

**Types of Break-even**

There are two major types of break-evens and they are -

- The Cash Break-even
- The Income Break-even

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**Use of the Term in Sentences**

- Break-even Analysis is one of the most straightforward ways to measure the progress and estimate the promise of any business.
**To measure the profit generation break-even analysis is the most important step.**