Training Guide for Break-Even Analysis. What is break-even analysis? Breakeven analysis is a calculation to show at what point you make no profit or loss, so it is when a company's total revenue covers total costs, so it serves to show how much output you will have to produce to cover total costs , within a company. The breakeven is usually shown in the form of a graph. To reach the break-even point of a company, 3 important components are needed which are:1. Fixed costs, which are usually not associated with production: These are costs that have a fixed price and do not change whether income is high or low, for example rent and insurance.2. Variable costs: These are costs that change based on the amount of use and sales output and production capacity, such as electricity, parts, and materials. Fixed costs and variable costs amount to total costs.3. Selling Price: The price at which they will sell their product or service. Once you've calculated the breakeven and found where it is, you can figure out where your margin of safety is. The margin of safety is where a company can see at what point they will start to make a loss, so on a break-even chart the margin of safety would be at the break-even point and beyond, as if they fell below the break-even point from they would start making a loss. Below is a breakeven graph, this will help you understand the breakeven. As you can see the break-even point is represented by the letter P and is the total revenue line in blue and the total cost line in red that cross to give the break-even point. If the company falls below the dotted break-even line, it will incur a loss, but if it goes above the break-even line, it will be in profit. The gray straight line at the bottom represents fixed costs. www.tutor2u.net The site the graph comes from. Use break even;1. It can be used to show the amount of output the company will need to produce to cover total costs.2. It can be used to set production goals, such as whether the company needs to increase production, etc. It can be used to set goals and objectives to break even or to make a percentage of profit over breakeven over a certain period of time and can monitor these goals.