Break-even analysis is a financial calculation used to determine the point at which a business's revenues equal its costs, resulting in neither profit nor loss. This point is known as the break-even point. To perform a break-even analysis, the following steps are typically followed:
Identify Fixed Costs: These are costs that do not change with the level of production, such as rent, salaries, and insurance.
Identify Variable Costs: These are costs that vary directly with production levels, such as raw materials and direct labor.
Calculate the Contribution Margin: This is the selling price per unit minus the variable cost per unit.
Calculate the Break-even Point: Divide the total fixed costs by the contribution margin per unit.

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