What is breaking even and how is it calculated?

Breaking even refers to the point in which a businesses total revenue is equal to it's total cost, at this stage businesses are not making a profit or a loss. Breaking even is typically calculated in order to help a firm to decide how many products need to be sold and at what price in order to make a profit.

The break-even point is calculated by using the following equation:

fixed costs/price - variable costs = break-even point in units