CHAPTER 15

Quadratic Equation

It can be argued that when the relevant range is used, the traditional breakeven formula shows a relatively linear relationship between quantity and cost and revenue. The basic formula for breakeven analysis also assumes that the business situation is unchanging in terms of selling price, unit variable costs, fixed costs, product mix, and a host of other variables that can affect both revenue and costs. Can we calculate breakeven when either the revenue curve or the cost curve is changing? For example, a company may face new competitors in the market that offer more choices for customers. These companies enter the market for the product because the investors believe they can capture cash value from customers if demand ...

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