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NIKOLAOS TSORAKIDIS; SOPHOCLES PAPADOULOS; MICHAEL ZERRES; CHRISTOPHER ZERRES BREAK‐EVEN ANALYSIS DOWNLOAD FREE TEXTBOOKS AT BOOKBOON.COM NO REGISTRATION NEEDED Break-Even Analysis Introduction Nikolaos Tsorakidis, Huron University, London Sophocles Papadopoulos, Huron University, London Michael Zerres, Universität Hamburg Christopher Zerres, Universität Kassel 1. Introduction Break-Even analysis is used to give answers to questions such as “what is the minimum level of sales that ensure the company will not experience loss” or “how much can sales be decreased and the company still continue to be profitable”. Break-even analysis is the analysis of the level of sales at which a company (or a project) would make zero profit. As its name implies, this approach determines the sales needed to break even. Break-Even point (B.E.P.) is determined as the point where total income from sales is equal to total expenses (both fixed and variable). In other words, it is the point that corresponds to this level of production capacity, under which the company operates at a loss. If all the company’s expenses were variable, break-even analysis would not be relevant. But, in practice, total costs can be significantly affected by long-term investments that produce fixed costs. Therefore, a company – in its effort to produce gains for its shareholders – has to estimate the level of goods (or services) sold that covers both fixed and variable costs. Break-even analysis is based on categorizing production costs between those which are variable (costs that change when the production output changes) and those that are fixed (costs not