Uses of a break even analysis
Break even analysis enables a business organization to:
1.Measure profit and loses at different levels of production and sales.
2.To predict the effect of changes in price of sales.
3.To analysis the relationship between fixed cost and variable cost.
4.To predict the effect on profitablilty if changes in cost and efficiency.
Even though break even has these advantages or uses, there are also several demerits of break even analysis.
Disadvantages of break even analysis
1.Assumes that sales prices are constant at all levels of output.
2.Assumes production and sales are the same.
3.Break even charts may be time consuming to prepare.
4.It can only apply to a single product or single mix of products