A break even point is a point at which a firm earns no profit and does not bear any loss. It is a point at which the total sales are equal to total costs. In other words, contribution is sufficient to cover only fixed cost. At break even point, the income of the firm is equal to the expenditure. Every unit produced after break even point contributes to the profit of the organization.
The break even chart can be primarily drawn to understand the relationship between the costs, sales and profit at various level of activity. The main feature of the break even chart is that it shows the break even point and the profits and loss at different levels of activities. The CIMA London defines the Break Even chart as,"a chart which shows neither profit nor loss at various levels of activity, the level at which neither profit nor loss is shown being termed as break even point." It is a graphical representation of cost and revenue and their interrelationships at different activity levels.
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