Introduction

A break-even analysis is a technique widely used in all kinds of businesses. It is based on categorising production costs between those which are "variable" and those that are "fixed".

Fixed costs are costs that are not directly related to the volume of production, like bills; and Variable costs are those which change when the production output change.

e.g. a pizza shop's fixed costs will be the salaries of staff, rent fee, bills...etc., and their variable costs will be things like tomato sauce, pizza boxes, cheese...etc.