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## 14.21. Break-even analysis

In simple words, the break-even point can be defined as a point where total costs (expenses) and total sales (revenue) are equal. Break-even point can be described as a point where there is no net profit or loss. The purpose of break-even analysis is to determine the equilibrium point at which sales revenues equal the costs of products sold. The firm just “breaks even.” Any company that wants to make an abnormal profit desires to have a break-even point. Graphically, it is the point where the total cost and the total revenue curves meet.

### 14.21.1. Calculation (formula)

Break-even point is the number of units (N) produced that make zero profit.

$Revenue−Totalcosts=0$

(14.16)

$Totalcosts=Variablecosts∗N+Fixedcosts$

(14.17)

$Revenue ...$

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