Finance and accounting
Breakeven
The volume or revenue at which profit is exactly zero.
Facts checked against sources onWhat does Breakeven mean?
Breakeven is the point where total revenue equals total cost, so profit is zero. Breakeven units = fixed costs ÷ contribution per unit (price minus variable cost per unit). Breakeven revenue = fixed costs ÷ contribution margin ratio. Fixed costs of 60,000 and a contribution of 15 per unit give a breakeven of 4,000 units. Always compare the breakeven with a realistic estimate of demand.
Where does it come up in case interview prep?
- Unit economics in any businessLesson in How industries work: the toolkit
- Scenario planning: base, upside, downside, and deciding when you cannot knowLesson in Making operations better, and planning for what can go wrong
- Diagnosing a profit decline: the reference caseLesson in Profitability
- The arithmetic, from the ground upLesson in Case math and quantitative reasoning
- How hospitals and insurers make money: costs, unit economics and operationsLesson in Healthcare providers and payers
- Main players, trends 2024 to 2026, regulation and casesLesson in Healthcare providers and payers
- Market entryLesson
- Planning the work and building a simple modelLesson in Saying so what: synthesis and communication at work
- BreakevenWhy reciting it fails, and what to do instead
Related terms
- Fixed costA cost that stays the same when volume changes, within a normal range.
- ContributionWhat each sale adds after its own variable cost.
- Contribution marginRevenue minus all variable costs, as an amount or a percent of revenue.
- ProfitThe money left over after costs. Revenue minus cost.
- RevenueMoney earned from sales, before costs.
- CostWhat it takes to make and sell the product in a period.
- Variable costA cost that rises and falls with how much you make.
- Semi-variable costA cost with a fixed part and a part that moves with volume.
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