Break-even Point
Example
If a coffee shop’s fixed costs are $10,000 per month and its variable costs are $2 per cup of coffee, the shop would need to sell enough coffee to cover both fixed and variable costs to break even.
Definition
The break-even point is the level of sales at which total revenues equal total costs, resulting in neither profit nor loss. It represents the minimum amount of sales a business needs to cover its fixed and variable expenses. Understanding the break-even point helps businesses set sales targets and pricing strategies.
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