Break-Even-Analysis

Introduction Break-Even Analysis Nikolaos Tsorakidis, Huron University, London Sophocles Papadopoulos, Huron University, London Michael Zerres, Universität Hamburg Christopher Zerres, Universität Kassel 1. Introduction Break-Even abridgment is used to give answers to questions such as what is the minimum level of gross revenue that ensure the fraternity allow not experience loss or how overmuch groundwork gross sales be decreased and the order unbosom come about to be profitable. Break-even abridgment is the analysis of the level of sales at which a company (or a project) would make zero profit. As its name implies, this approach determines the sales needed to break even. Break-Even institutionalise (B.E.P.) is determined as the crown where do income from sales is equalize to total expenses (both immovable and variable quantity). In other words, it is the point that corresponds to this level of yield capacity, under which the company operates at a loss. If all the companys expenses were variable, break-even analysis would not be relevant. But, in practice, total be tail be significantly affected by long-run investments that uncover heady be. Therefore, a company in its lawsuit to offer gains for its shareholders has to estimate the level of goods (or services) sold that covers both fixed and variable costs.

Break-even analysis is based on categorizing production costs betwixt those which are variable (costs that change when the production output point out changes) and those that are fixed (costs not directly related to the masses of production ). The distinction between fixed costs (for ! example administrative costs, rent, overheads, depreciation) and variable costs (for exampel production wages, raw materials, sellers commissions) can easely be made, even though in some cases, such as plant maintenance, costs of utilities and insurance associated with the factory and production handlers wages, need special treatment. Total variable and fixed costs are compared with sales revenue...If you want to get a dear essay, order it on our website: OrderCustomPaper.com

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