To highlight the concept of break-even analysis
To explain the determination of break-even point in case of a single commodity/mix of commodities
To evaluate the use of the break-even analysis for profit planning
To pinpoint the limitations to the break-even analysis
Finance managers interpret financial ratios for policy measures. But, at the same time, they also plan the profit. The process of profit planning is a two-step one. The first step is to have an idea of the break-even output, where revenue is able to recover the total cost. When this point is established, the second step begins when the finance manager designs the costs, volume and price so as to plan the profit. The present chapter discusses ...