A break-even analysis is a financial calculation that weighs the costs of a new business, service or product against the unit sell price to determine the point at which you will break even.

What does a break-even analysis mean?

Break-even analysis determines the number of units or amount of revenue that's needed to cover your business's total costs. At the break-even point, you aren't losing or making any money, but all the costs associated with your business will have been covered.

What is Breakeven analysis example?

For example, selling 10,000 units would generate 10,000 x $12 = $120,000 in revenue. ... If the company sells 10,000 units, the company would incur 10,000 x $2 = $20,000 in variable costs and $100,000 in fixed costs for total costs of $120,000. The break even point is at 10,000 units.