Question

write in your own words

1. Discuss the usefulness of Break-Even Analysis to various stakeholders such as customers, marketing departments and finance department of an organization. at least 200 words

Answer 1

Break even analysis give the calculation between the various level of units as against profit at that level. Break even Analysis determines the level at which you will be at no loss or it is better to shut down.

Break even point can be determined by using break even analysis whereby an organisation know the target of the sales to be made in order to incur no loss . Also with the help of break even point margin of safety sales can be determined by the organisation.

Break even analysis also provide the effect of changes in sale price which can be useful to the organisation in fixing the selling price of the product or if the organisation is planning to launch a new product they can determine the selling price of the product.

Break even analysis also gives the relationship between the fixed cost and variable cost with help of different ratios and formulas

Also break even analysis provides organisation level of efficiency at which they can earn the maximum profit at given point of sales and at a given point of selling price.

Also this gives a way to organisation to increase the efficiency of the production by reducing the cost to the minimum level they can and maximizing the profit.

So by this break analysis an organisation can do the cost management easily and effectively.