Break-even Analysis Form

SUMMARY

1. The main purpose of break-even analysis is to determine the output level at which TR is

equal to TC. Break-even analysis is easy to do (and thus its popularity) if both the

product price and the average cost are constant. Graphically, the break-even output is

where the TR curve and the TC curve intersect.

2. Break-even analysis is a popular tool to examine the effects of TFC and TVC on break-

even output level and on the degree of operating leverage. The degree of leverage

expresses the sensitivity of total profit with respect to output.