CHAPTER 6

Modified Breakeven Analysis

Factoring Estimates of Demand

We know selling price plays an important part in determining the breakeven point. With everything else unchanged, the lower the price, the higher the breakeven point and vice versa. Cost is an important factor that influences price. In fact, we can say that price is never completely separated from cost considerations. With everything else unchanged, the higher the costs the more managers will be inclined to raise the price and vice versa. Price in its relationship to cost is important, but it is not the only factor to consider.

For most products and services offered in competitive markets, managers must take into consideration the competition and how customer behaviors might ...

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