Break-even analysis shows how many sales it takes to pay for the cost of doing business. Analyzing different price levels relating to various levels of demand, the break-even analysis determines what level of sales is necessary to cover the company's total fixed costs.
Break-even analysis is useful in determining the level of production or a targeted desired sales mix. The study is for a company's management’s use only, as the metrics and calculations are not used by external parties, such as investors, regulators, or financial institutions.
The break-even point is calculated by dividing the total fixed costs of production by the price per individual unit less the variable costs of production. Fixed costs are costs that remain the same regardless of how many units are sold.

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