Methods of calculating a break-even point can vary depending on the type of business. Manufacturing firms need to consider more variables associated with production costs than a sales or service type business. This main focus of this article is to determine the break-even point for a company that’s in the sales or service business.

What is a Break-even Point?

To break even means that sales, less costs and expenses equals zero profits. When a company breaks even, they did not take a loss and they did not make a profit. The break-even point is the actual amount of sales where zero profit is realized. If the company falls below the break-even point in sales, it means there was a net loss. If they go above the (sales) point, they should realize a net profit.

Break-even Point Analysis and the Income Statement

For a company that’s in the sales or service business, the information to calculate the break-even point can be found on the income statement. The data that’s needed is the same information needed to calculate net profit or loss.

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