Question

Mathematical Models: Do you think the mathematical model Breakeven Point (BEP) is important? Does a firm need to know it's BEP? What are some ways to reduce the firm's BEP?

Answer 1

✓ a break even point in break even analysis, is a very important part of business plan. It helps the firm to determine a point that guides the productions/operations department to produce certain units of products, that equate the revenue and costs. And to know from what units of products and costs the firm will start making profits.

✓It is an important tool for every business, that helps in managing resources, time, costs and calculation of production volume to speed up the growth and to cross the break even point for generating profits.

✓A firm needs to know it's break even point In order to decide costs of production, resources required, and units to be produced for remaining safe and reducing the risk factors, that could bring heavy losses.

✓ Break even point can be reduced by reducing the fixed cost (not varying with output) and variable costs (varying with output). By increasing the production volumes and focusing on the quality in order to promote larger sales, with effective promotional, distribution, and marketing efforts.

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