What is a Break-even Analysis? Definition or Meaning

You would want to know how many products your company needs to sell to cover your production costs and start making revenue, wouldn’t you? Break-even analysis helps you achieve just this. It is a financial analysis of your fixed and variable costs associated with making the product as well as its unit price. This is the analysis that will help you calculate the point where revenues equal expenditure.

For example…

As the name suggests, break-even analysis can point out when you will stop making a profit or a loss, in other words, you “break even”. A break-even analysis will allow a massage chair manufacturer to calculate how many units of massage chairs they need to sell to arrive at a point where they are neither making a profit or loss. Other factors used in the analysis include the total production costs, fixed price of production per chair and a variable price of production per chair.