What is the role provided by break-even point and how would you calculate this point?

The break-even point is a concept used in finance and economics to determine the level of production or sales at which total revenue equals total costs. In other words, it is the point at which a business neither gains nor loses money. This information can be useful for businesses to understand how much they need to produce or sell in order to remain profitable.

Calculating the break-even point requires understanding both revenue and cost structure. The basic formula for doing so involves subtracting total variable costs from total revenue and then dividing the result by contribution margins (the amount left over after subtracting variable costs from each unit sold). More specifically, this calculation can be written as Break-Even Point = Fixed Costs/(Revenue per Unit – Variable Costs per Unit). By understanding their break-even point, businesses are able to better plan their production or sales strategies with an eye towards remaining competitive while also ensuring profitability.