Question

Discuss what a break-even analysis is. What are the advantages and disadvantages of this tool? How...

Discuss what a break-even analysis is. What are the advantages and disadvantages of this tool? How is it used by managers? How do you see it being used at your organization?

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Break even analysis is used to find out sales level at which company is into no profit and no loss situation.

Break even point = Total fixed cost / contribution per unit

Using above formula you can find out sales quantity at which there would be no profit no loss situation.

Advantages is that it is very simple costing concept which can be used to know at what level of sales would company start earning profits. Further, it can be used to find sales quantity required to reach certain profits. Thus, it can be used as per requirement of the company.

Break even sales for profit X = (Fixed cost + X profits)/contribution per unit

Disadvantages are not material enough to not use Break even analysis. However, it assumes sales price as constant for all goods sold and also if data provided is incorrect then analysis would be incorrect.

This method is used in organozaorga widely -

In inception stage of business to find level of output sales required so that company gets into profits.

In maturity stage to find out levels at which company meets its Target profits.

In saturation stage to find level of sales at which one can maintain profits levels.

At during decline sales level to ensure company do not get into losses.

Add a comment
Know the answer?
Add Answer to:
Discuss what a break-even analysis is. What are the advantages and disadvantages of this tool? How...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT