Livestock Economics, Marketing and Business Management

BREAK-EVEN POINT

• Break-even point is the output level corresponding to minimum point of average total cost.
• A farmer must produce at least this amount of product to cover the total cost of production. Whatever is produced above this point will be the profit for the farmer.
• The point where the farmer recoups his investment is the Break-even point.
• The investment is in the form of fixed cost and variable cost, which constitutes the total cost.
• When the total cost is equal to total revenue it is Break-even point. It can be calculated by,

• Service charge = How much one gets by selling an individual unit of output.
• The Break-even point nearer to the origin indicates less loss and more profit zones.
• The Break-even point away from the origin indicates more and more loss zone and less and less profit zone.
• Nearness of Break even point to the origin also indicates whatever the farmer is producing is market worthwhile.
• Due to this the farmer will recoup his investment even by producing less number of units of output.
• The Break even point away from the origin indicates to recoup the investment the farmer has to produce larger number of units of output which is an indication that whatever the farmer is producing is not so market worthwhile.