# Breakeven Point (BEP) Definition

## What Is the Breakeven Point (BEP)?

The breakeven point (break-even price) for a trade or investment is determined by comparing the market price of an asset to the original cost; the breakeven point is reached when the two prices are equal.

In corporate accounting, the breakeven point formula is determined by dividing the total fixed costs associated with production by the revenue per individual unit minus the variable costs per unit. In this case, fixed costs refer to those which do not change depending upon the number of units sold. Put differently, the breakeven point is the production level at which total revenues for a product equal total expenses.

### Key Takeaways

• In accounting, the breakeven point is calculated by dividing the fixed costs of production by the price per unit minus the variable costs of production.
• The breakeven point is the level of production at which the costs of production equal the revenues for a product.
• In investing, the breakeven point is said to be achieved when the market price of an asset is the same as its original cost.

## Understanding Breakeven Points (BEPs)

Breakeven points can be applied to a wide variety of contexts. For instance, the breakeven point in a property would be how much money the homeowner would need to generate from a sale to exactly offset the net purchase price, inclusive of closing costs, taxes, fees, insurance, and interest paid on the mortgage—as well as costs related to maintenance and home improvements. At that price, the homeowner would exactly break even, neither making nor losing any money.

Traders also apply BEPs to trades, figuring out what price a security must reach to exactly cover all costs associated with a trade including taxes, commissions, management fees, and so on. A company’s breakeven is likewise calculated by taking fixed costs and dividing that figure by the gross profit margin percentage.

## What Is a Breakeven Point?

A breakeven point is used in multiple areas of business and finance. In accounting terms, it refers to the production level at which total production revenue equals total production costs. In investing, the breakeven point is the point at which the original cost equals the market price. Meanwhile, the breakeven point in options trading occurs when the market price of an underlying asset reaches the level at which a buyer will not incur a loss.