Break even analysis
 Break even analysis is a technique used to assess the level of output at which the farmer realizes no loss or no profit. The level of output at which the total cost is equal to total returns is termed as Break Even Point (BEP).
 The BEP can be estimated mathematically or with a graph. The data on total cost (TC) and total return (TR) for various levels of output have to be drawn in a graph and the point of intersection of the TC with TR is the BEP. It is represented on the chart below by the intersection of the two lines:
Fig: Total Cost, Total Return and Break Even Point
 In the given figure, the line OA represents the variation of income at varying levels of output, OB represents the total fixed costs in the farm. As output increases, variable costs are incurred, meaning that total costs (fixed + variable) also increase (BC). At low levels of output, costs are greater than Income. At the point of intersection, P, costs are exactly equal to income, and hence neither profit nor loss is made.

Last modified: Wednesday, 20 June 2012, 4:33 AM