Monday, March 10, 2008

Break Even Analysis

Break even analysis equates total revenue and total cost. It is useful because it allows you see where you will just break even (make zero profit) and it will provide you with a range of outputs, at given prices and costs, over which you will make a positive profit.

I asked this question on an exam and got the following response:

Q: Why is break even analysis a useful tool?

A: Break is a useful tool because in order to do the job you must have a break.

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