11
Breakeven analysis
INTRODUCTION
Managers often want to know what quantity of a particular product has to be made in order to break even or produce a specific profit margin. This methodology divides costs into fixed and variable and seeks to find a level of production which results in a breakeven state or zero contribution to profits. A model can help by applying the formulas and adding sensitivity analysis to the initial result. As a related activity, the degree of operating leverage is also calculated and this refers to the change in earnings to each $1 of production.
The file used in this chapter is MFM3_11_Leverage.
BREAKEVEN
The model assumes that ...
Get Mastering Financial Modelling in Microsoft Excel 3rd edn, 3rd Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
