break even analysis

The break-even point for a product is the point where total revenue received equals the total costs associated with the sale of the product (TR = TC).[1] A break-even point is typically calculated in order for businesses to determine if it would be profitable to sell a proposed product, as opposed to attempting to modify an existing product instead so it can be made lucrative. Break even analysis can also be used to analyze the potential profitability of an expenditure in a sales-based business.

break even point (for output) = fixed cost / contribution per unit

contribution (p.u) = selling price (p.u) - variable cost (p.u)

break even point (for sales) = fixed cost / contribution (pu) * sp (pu)