Why is Break-even analysis essential?

1.	Why is Break-even analysis essential?
Answer» Break-even analysis is a technique which is helpful in planning and control of profit. It is helpful in making a relation between profit and cost. Following are some points which clarify the utility of break-even point. (1) Diagnostic tool:- It present diagnosis of reasons before analysis management. (2) Risk Evaluation:- Break-even analysis proves very useful in the evaluation of risk assessment. It is very helpful regarding the decision of order acceptance shift-work, sale mixture, purchase and make etc. (3) Profit Improvement:- The break-even point and profit volume ratio are calculated under break-even analysis and the improvement of the profit is obtained on its basis.

Answer»

Break-even analysis is a technique which is helpful in planning and control of profit. It is helpful in making a relation between profit and cost. Following are some points which clarify the utility of break-even point.

(1) Diagnostic tool:- It present diagnosis of reasons before analysis management.

(2) Risk Evaluation:- Break-even analysis proves very useful in the evaluation of risk assessment. It is very helpful regarding the decision of order acceptance shift-work, sale mixture, purchase and make etc.

(3) Profit Improvement:- The break-even point and profit volume ratio are calculated under break-even analysis and the improvement of the profit is obtained on its basis.

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