A Break-Even Price is the amount of money, or change in value, required to sell an asset in order to offset the costs of purchasing and owning it. It may also refer to the quantity of money required to pay the costs of making or supplying a product or service. The break-even price in options trading is the price in the underlying asset at which investors can choose to exercise or dispose of the contract without incurring a loss. In microeconomics, the break-even price (BEP) is the price at which the total revenue from the sale of a good or service equals the total cost of producing that good or service. This occurs when the Marginal Cost (MC) of producing the good or service equals the Marginal Revenue (MR) generated by its sale.
The break-even price is an important concept in business because it is the price at which a company can cover its costs and achieve profitability. The break-even point can be used to measure a company’s potential for profit or loss at different prices and quantities.In order to achieve profitability, a company must generate more revenue than its costs. The company can increase its profits by raising its prices above the break-even price, lowering its costs below the break-even price, or by both. Conversely, a company will experience losses if its revenue falls below the break-even price.
