What is break-even analysis?

Full explanation

Break-even point (BEP) in units = Fixed costs / (Price per unit - Variable cost per unit). The denominator is the contribution margin — what each unit contributes to covering fixed costs. Example: Fixed costs ₹5 lakh/month, product price ₹500, variable cost ₹300. Contribution margin = ₹200. BEP = 5,00,000 / 200 = 2,500 units/month. The break-even chart shows how profit increases as volume grows above BEP. Break-even analysis is foundational for pricing, capacity planning, and business viability assessment.