What is a breakeven point?

A breakeven point is used in multiple areas of business and finance. In accounting terms, it refers to the production level at which total production revenue equals total production costs. In investing, the breakeven point is the point at which the original cost equals the market price.

What is a break-even number?

Once the break-even number of units is determined, the company then knows what sales target it needs to set in order to generate profit and reach the company’s financial goals. Break-even analysis in economics, financial modeling, and cost accounting refers to the point in which total cost and total revenue are equal.

What is a breakeven analysis?

A breakeven analysis will show you how to properly price your products from a business standpoint. Assume an investor buys Microsoft stock ( MSFT) at $110. That is now their breakeven point on the trade. If the price moves above $110, the investor is making money. If the stock drops below $110, they are losing money.

How do you calculate a breakeven point in accounting?

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.