- The point at which total of fixed and variable costs of a business becomes equal to its total revenue is known as break-even point (BEP). At this point, a business neither earns any profit nor suffers any loss. Break-even point is therefore also known as no-profit, no-loss point or zero profit point. Calculation of break-even point is important for every business because it tells business owners and managers how much sales are needed to cover all fixed as well as variable expenses of the business or the sales volume after which the business will start generating profit. Break-even analysis is of vital importance in determining the practical application of cost functions. It is a function of three factors, i.e. sales volume, cost and profit. It aims at classifying the dynamic relationship existing between total cost and sale volume of a company. Hence it is also known as “cost-volume-profit analysis”. It helps to know the operating condition that exists when a company ‘breaks-even’, that is when sales reach a point equal to all expenses incurred in attaining that level of sales. The break-even point may be defined as that level of sales in which total revenues equal total costs and net income is equal to zero. This is also known as no-profit no-loss point. This concept has been proved highly useful to the company executives in profit forecasting and planning and also in examining the effect of alternative business management decisions.