Give an example of how you could use break-even analysis in a personal finance situation.

Expert Solution

A break-even analysis is a financial tool which helps you to determine at what stage your company, or a new service or a product, will be profitable. In other words, it’s a financial calculation for determining the number of products or services a company should sell to cover its costs (particularly fixed costs). Break-even is a situation where you are neither making money nor losing money, but all your costs have been covered. The same can be used for the personal life too.

Assume you are a driver running car for rent. You are charging 30/km. Your average expenses on fuel is 15/km and related expenses is 5/km. And you have taken loan from a bank to finance the car, EMI for a month is 1500/-. Your balance savings after variable cost is 10/km (30-15-5). So to save the EMI amount you have to Run 150Km (1500/10). You are at break even when your km reach at 150 in month. At 150km Your total Income will be 4500 (150*30) and your expenses also will be 4500/- ((150*(15+5))+1500). At this stage you have no profit or loss. After 150km you will start earning profit.

jeff jeffy answered 6 months ago

Give a detailed example of a managers need for break even analysis? please advise

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