Question

: Explain why Break-even point analysis is important in planning for decision makers.

please answer in your words

Answer 1

A break-even point means neither a profit nor a loss.It calculates the minimum number of units to sell and the sales volume needed to pay all variable and fixed expenses before making a profit. hence, it is an important tool in Business decision making. Because, Break-even analysis will help planners determine the sales quantity or number of products that must be sold in order for the business to generate enough revenue to pay its expenses.It helps in controlling the cost. With break-even analysis, managers can gauge the impact of changing selling prices on sales volume and profitability. Break-even analysis will also help decision makers schedule product inventory levels.