Question

4) Provide a business example or application of how BE analysis is used.
5) Discuss how breakeven analysis helps managers create revenue or pricing strategies.

Answer 1

4)

a break even analysis is a financial tool that helps you determine at which stage your company, product or service will be profitable. it is a financial calculations used to determine the number of products or services a com[\pany must sell to cover its expenses,espacially the fixed costs. at break even point the company have no profit that is fixed cost will be equal to total contribution

consider an example

SS company sales a product for $13 and its variable cost per unit is $9 and total fixed cost is $240000.

from these details we are going to find break even sales

given break even sales =total fixed cost/contribution per unit

contribution per unit=selling price per unit-variable cost per unit

contribution per unit=$13-$9=$4

break even sales =$240000/$4=60000 units

this means that when the company sells 60000 units the company have no profit no loss

if the company exceeds 60000 units then it will experince profits

if the company sells less than 60000 units then it will experiance a loss

5)

breakeven analysis helps managers in create revenue by identify the point of profitability also it helps to find out how much revenue did the company need to generate to cover all expenses

it ensures that you properly price a product or service,finding the breakeven point will help your price your product correctly.you will know where you need to set your margins to generate the right amount of revenue to breakeven and begin turning a profit

it also helps the manager to find the sales to achieve a targeted profit

breakeven sales for a targeted profit=(total fixed cost + targeted profit)/contribution per unit