Break Even Point

Predict Profit

Can see how much profit they would make at different volumes of sales

Break even is expressed as

Units not Money!

Loss

A negative difference between the revenues taken in by a business and the costs of operating a business.

"What If"

Allows them to see what would happen in different situations

BEP

Fixed Costs / Contribution ( SP - VC )

Inform Pricing Decisions

Helps a business decide how much they should charge for their product / service. They want their business to be profitable

Profit

Is a positive difference between a firm's revenue and its costs

Margin of Safety (MOS)

Is the difference between a firm's level of demand and its break-even quantity. A positive MOS means the firm can decrease output (sales volume) by that amount without making a loss. A negative MOS means that the firm is making a loss.

Seek Finance

Lenders will only commit money to a business if they are confident it will be profitable, BE can promote their business

Contribution Definition

The amount each sale provides towards fixed costs or profit Price - VC

Break-even Point

The point at which sales revenue equals the total cost of producing a good or service.