Uses of Break-Even Analysis
Break-even analysis is useful for several reasons:
It provides a review of the safety margins of a business and shows whether the level of safety margin has to go up or down to account for the level of break-even sales.
It can be used to analyze whether there needs to be a change in the price of a product to adjust for the break-even level of sales.
It helps to choose a suitable production technique that can be utilized to fulfill the target of break-even sales.
It helps to show how choosing a different business model can be utilized to fulfill the target of break-even sales or how the level of break-even sales changes in accordance with the various business models.
The change in costs of production leads to a change in the level of break-even sales. This can be determined by a break-even analysis.