Break even point or B.E.P. pricing method:
Break even point is the volume of sales at which the total sale revenue of the product is equal to its total cost. In other words, it can also be said that break even point is the volume of sales at which there is no profit and no loss. Therefore this method is also known as so profit no loss pricing method for the purpose of determining price under this method total cost of production of a product is divided into two part - fixed costs and variable costs.
The price is determined equal to the total cost of production of the product. It is based on the fact that in short-run the enterprise will not make any profit but in long-run it will start to earn profit and higher be the scale of production more will be the amount the fixed costs are recovered in the beginning the enterprise starts to get profit with the increase in sales above break even point. This method of pricing is very useful for determining the price of a competitive product. under this method B.E.P. can be calculated as under: