Break Even Point

Cost of Production refers to the amount of money which is spent by a business in order to produce goods and services. Cost of production includes raw material costs, direct costs, labor costs and indirect factory overheads.

An expense is an amount spent by the business to run the day to day operations of the business.

Total cost includes fixed and variable costs.
Fixed costs do not change with output
Variable costs change with output
                                      
                                           TR>TC= Profit[positive]
                                           TR<TC= Loss[negative]
                                           TR=TC= Break even


Break Even is the amount of goods that a business must sell in order to cover all of their costs of production. At break even the business does not make a profit nor a loss, their income is equal to zero.
Margin of safety refers to the amount of goods a business must sell after breaking even in order to make a profit

Contribution is the amount which is left to cover fixed costs and make a profit. It is Selling Price - Variable Cost

BEP = Fixed cost
          Contribution
Margin of Safety = Total units sold - BEP x Contribution