break-even


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Related to break-even: Break-even analysis

Break Even

1. To make the sales or revenues necessary to cover costs and prevent a firm from operating at a loss. The breakeven may be relatively stable or it may fluctuate, depending on the company or industry. Companies with high breakevens tend to have large fluctuations in earnings from year to year.

2. To sell a security at a price that causes the seller to neither make a profit nor lose money on the sale.
Break-evenclick for a larger image
Fig. 11 Break-even. A supplier's typical short-run costs and revenues. Fixed costs do not vary with output and so are shown as the horizontal line FC. Total cost comprises both fixed costs and total variable costs and is shown by line TC. Total revenue rises as output and sales are expanded and is depicted by line TR. At low levels of output such as Q total costs exceed total revenues and the supplier makes a loss equal to AB. At high levels of output such as Q2 revenues exceed costs and the supplier makes a profit equal to DE. At output Q1 total revenues exactly match total costs (at C) and the supplier breaks even.

break-even

the short-run rate of output and sales at which a supplier generates just enough revenue to cover his fixed and variable costs, earning neither a PROFIT nor a LOSS. If the selling price of a product exceeds its unit VARIABLE COST then each unit of product sold will earn a CONTRIBUTION towards FIXED COSTS and profits. Once sufficient units are being sold so that their total contributions cover the supplier's fixed costs then the company breaks even. If less than the break-even sales volume is achieved then total contributions will not meet fixed costs and the supplier will make a loss. If the sales volume achieved exceeds the break-even volume, total contributions will cover the fixed costs and leave a surplus which constitutes profit. See Fig. 11.

Differences in cost structures can have a significant effect upon companies' break-even points. For example, a company with low levels of automation and so little capital equipment (for example Rolls Royce cars) would have low fixed depreciation costs but high direct labour costs. With high unit direct costs relative to selling prices such a firm would have a low unit contribution but low fixed costs, so would break even at a low sales volume, though profits would climb only slowly beyond the break-even point because of low unit contribution. By contrast, a highly automated plant would have high fixed depreciation costs, but with low unit direct labour costs, would have a higher unit contribution. Firms with such plants (for example Ford) would not break even until a much higher sales volume was achieved, but thereafter profits would increase rapidly with larger unit contributions. See MARGINAL COSTING, PROFIT-VOLUME CHART.

Break-evenclick for a larger image
Fig. 17 Break-even. A supplier's typical short-run costs and revenues. Fixed costs do not vary with output and so are shown as the horizontal line FC. Total cost comprises both fixed costs and total variable costs and is shown by line TC. Total revenue rises as output and sales are expanded and is depicted by line TR. At low levels of output like Q, total costs exceed total revenues and the supplier makes a loss equal to AB. At high levels of output like Q2 revenues exceed costs and the supplier makes a profit equal to DE. At output Q1 total revenues exactly match total costs (at C) and the supplier breaks even.

break-even

the short-run rate of output and sales at which a supplier generates just enough revenue to cover his fixed and variable costs, earning neither a PROFIT nor a LOSS. If the selling price of a product exceeds its unit VARIABLE COST, then each unit of product sold will earn a CONTRIBUTION towards FIXED COSTS and profits. Once sufficient units are being sold so that their total contributions cover the supplier's fixed costs, then the company breaks even. If less than the break-even sales volume is achieved, then total contributions will not meet fixed costs and the supplier will make a loss. If the sales volume achieved exceeds the breakeven volume, total contributions will cover the fixed costs and leave a surplus that constitutes profit.
References in periodicals archive ?
For the Saudi-led bloc in OPEC - excluding Qatar, of course (see gmt18LNG-Nov3-14) - the break-even price is lower than $80/b.
Llistosella said, 'We want to see the operating break-even of this unit by calendar year 2016.
For 2014, Moody s expects expenditure growth to slow in the GCC, and fiscal break-evens oil prices will continue to converge with actual prices.
As a result, a number of economies (including) Algeria, Bahrain, Iran, Iraq, Libya, Yemen, have fiscal break-even prices above the projected oil price for 2014," it added.
According to Deutsche Bank's calculations, break-even oil prices of both Saudi Arabia and the UAE have fallen for the first time in the past few years.
Yet energy economists studying oil markets are tempted to approach fiscal break-even analysis with the feeling that it could shed more light on producers' production policy, said the report.
Our next goal is full break-even in 2011, leading to sustainable profitability from 2012 onwards.
Short straddle reaches its break-even points at 6,365 and 6,735.
As its name implies, break-even analysis calculates the unit or dollar sales needed to generate revenues that exactly match fixed and variable costs to produce net profit of zero.
Chairman Allan Leighton and chief executive Adam Crozier said in a joint statement accompanying the 2006-7 results that the combination of pension costs, revenue decline through losses to competition and the overall fall in mail volumes meant Royal Mail's letters division was heading towards break-even in the current financial year.
It had been feared the Luas would not hit its break-even target of 20 million passengers a year.
To begin the CVP analysis we must determine the break-even point for the proposal--ie, the sales figure (in units) that will generate neither a profit nor a loss.