Break-Even Point
Also called: breakeven, break even point
What is Break-Even Point?
The break-even point is the level of sales at which total revenue exactly equals total costs, so the business makes neither profit nor loss. It can be expressed in units, in covers, or in rupees of revenue.
Why Break-Even Point matters
Break-even turns an abstract worry into a daily target. Knowing you need 62 covers a day to cover costs changes how you read a slow Tuesday, and it is the first number to compute before opening a new outlet.
Break-Even Point formula
Break-even units = Fixed costs ÷ Contribution margin per unit
In revenue terms: fixed costs ÷ contribution margin ratio.
How Break-Even Point works in practice
Split costs into fixed and variable, work out contribution per unit, and divide fixed costs by it. Recompute whenever rent, salaries or supplier prices change, because break-even moves with every one of them.
Worked example
₹4,00,000 of monthly fixed costs against ₹160 contribution per cover needs 2,500 covers a month, or about 83 a day.
Frequently asked questions
Divide fixed costs by the contribution margin ratio rather than by contribution per unit.