The price at which a company exactly covers all its costs but earns zero profit is called the break-even price or price at break-even.

Key idea

At the break-even price, total revenue equals total cost.

  • Total revenue = Price × Quantity sold
  • Total cost = Fixed costs + Variable costs

So, the break-even price per unit is:

Break-even price per unit=Total fixed costs+Total variable costsNumber of units sold\text{Break-even price per unit}=\frac{\text{Total fixed costs}+\text{Total variable costs}}{\text{Number of units sold}}Break-even price per unit=Number of units soldTotal fixed costs+Total variable costs​

This is the minimum sustainable price if the goal is only to cover all costs with no profit.

Quick Scoop

  • The name of this price: break-even price.
  • What happens there:
    • All fixed costs (like rent, salaries, insurance) are covered.
* All variable costs per unit (materials, packaging, production) are covered.

* Profit = 0 (no loss, no gain).

If the company charges above the break-even price, it starts making profit; if it charges below , it operates at a loss.

Information gathered from public forums or data available on the internet and portrayed here.