# Kannattavuusraja

## Break-even point

Break-even point is a term used in finance and economics to describe the point at which total revenue equals total costs, resulting in neither profit nor loss. It is a crucial concept for businesses to understand as it helps in determining the minimum amount of sales needed to cover all costs.

Let’s take an example to understand break-even point. A company sells a product for \$10 and it costs \$5 to produce each unit. The fixed costs, such as rent and salaries, are \$1000 per month. To calculate the break-even point, we can use the formula:

Break-even point = Fixed costs / (Selling price per unit – Variable costs per unit)

Using the numbers from the example, the break-even point would be:

Break-even point = \$1000 / (\$10 – \$5) = 200 units

This means that the company needs to sell at least 200 units to cover all costs and start making a profit. Any sales above 200 units would result in a profit for the company.

Understanding the break-even point is essential for businesses to make informed decisions about pricing, production levels, and overall profitability.