Condition at Break-Even Point

At break-even point there is:

Correct Answer: No profit or loss

At the break-even point, there is no profit and no loss — total revenue exactly equals total cost.

Break-Even Point Concept

• Break-even point: The level of production/sales at which Total Revenue = Total Cost.
• Below break-even: Loss (costs exceed revenue)
• Above break-even: Profit (revenue exceeds costs)
• At break-even: Neither profit nor loss

Break-Even Analysis Terms

• Margin of safety: Actual sales minus Sales at break-even point. Indicates how much sales can fall before a loss is incurred.
• To increase margin of safety: Increase sales price, increase output, or reduce fixed/variable costs.
• Break-even point on graph: Intersection of the Total Revenue line and the Total Cost line.