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Break-even analysis provides a framework for understanding interrelationships between: 2. (1 mark) Fixed costs, Direct costs,

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Break Even Point tells us about how many units can be sold to ensure no profit or no loss. If the sales volume is less than break even point firm will incur loss and If the sales volume is more than break even point firm will earn profits. At break even Point Contribution is Equal to Fixed costs. Contribution can be calculated by deducting variable cost from selling price. Therefore Break Even Point(Sale Volume)= Fixed Costs/(Selling Price Per Unit-Variable Cost Per Unit)

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