What is the difference between shut down point and breakeven point?

Shut down point is that point at which firms earn less than normal profits. It is called shut down point because in the long run firm’s shutdown their operations at this point.

Breakeven point is that point at which there are zero normal profits, that is, there are no profits no losses. The firms break even at this point.

The shut-down point is the point where you have to close a business. In some countries this point is defined by the effective laws for example when your commulative losses exceeds50% of your capital.

the breakeven point is the point where your revinue form your sales equals your total total cost.

• A shut down point is a point beyound which the factory has to be shut down. If losses go beyond the shut down point it is more profitable to shut down the factory.
• The break even point is a balance between cost andrevenue. If the revenues increase beyound this point then the firn makes profit. When a new enterprise starts the headache of the production manager is how soon break even point can be reached.

Firm will choose to implement a Shutdown of production when the revenue received from the sale of the goods or services produced cannot even cover the variable costs of production. In that situation, the firm will experience a higher loss when it produces, compared to not producing at all.

Breakeven point is the point at which cost or expenses and revenue are equal.

 shutdown occurs if marginal revenue is below avg, variable cost at the profit-maximizing output. Producing anything would not generate returns significant enough to offset the associated variable costs; producing some output would add losses (additional costs in excess of revenues) to the costs inevitably being incurred (the fixed costs). By not producing, the firm loses only the fixed costs.

1. Shutdown point is a point of operations where a firm is indifferent between continuing operations and shutting down temporarily. The shutdown point is the combination of output and price where a firm earns just enough revenue to cover its total variable costs. If a firm is operating at its shutdown point, it is usually operating at a loss. The concept is that if a firm can produce revenue greater or equal to its total variable costs, it can use the additional revenue to pay down its fixed costs. This assumes that fixed costs will still be incurred when a firm shuts down, such as lease contracts or other lengthy obligations. In other words, when a firm can earn a positive contribution margin, it should remain in operations, despite an overall loss.
2. Breakeven point is a point at which gains equal losses. i.e. where total revenues equal total costs (both fixed and variable costs).