What Is The Break Even Analysis And How It Is Useful In Decision Making?


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introduction to break-even analysis

Break-even analysis is a technique widely used by production management and management accountants. It is based on categorising production costs between those which are "variable" (costs that change when the production output changes) and those that are "fixed" (costs not directly related to the volume of production).

Total variable and fixed costs are compared with sales revenue in order to determine the level of sales volume, sales value or production at which the business makes neither a profit nor a loss (the "break-even point

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I suppose s it tells you a lot about your finance it can be used to predict future trends in the business an help mangers to see if current activities are profitable. They also may use the break even to consider where they may need to reduce cost, maybe variable costs such as stock are very high so they may need to find a cheaper supplier?? Hope this helps

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