Learn in the textbookBreak-Even Point Analysis
DefinitionThe break-even point (損益分岐点) is the level of sales at which sales exactly equal total costs (fixed plus variable costs), so profit is zero.
ExplanationSales above this level produce a profit, and sales below it mean a loss. What is left after subtracting variable costs from sales is the contribution margin, and the break-even point is where the contribution margin just covers fixed costs. Using the share of sales taken by variable costs (the variable cost ratio), break-even sales = fixed costs ÷ (1 − variable cost ratio).
AnalogyPicture a coffee stand that sets aside what is left from each cup after paying for the ingredients. The moment those savings cover the month's rent is the line between losing money and making it.
Memory hook"Break even" means coming out with neither a gain nor a loss. Cross this point and you are in profit; fall short and you are in the red.