Examples include commissions etc. Cost Control and Monitoring Since managers know that the fixed and the variable costs affect the profitability of the business, they can see the effect of the changes to costs with the help of break-even analysis. Break-even analysis is a practical and popular tool for many businesses, including start-ups.
Here are the other articles in accounting that you may like —. For example, expressing break-even sales as a percentage of actual sales can help managers understand when to expect to break even by linking the percent to when in the week or month this percent of sales might occur.
Some of the popular examples include Rent, Insurance etc. Eg given market research information, what would happen if changes take place. This is a dangerous perception and there are many businesses that find out too late that if they had known where their break even point was, perhaps their business would not have failed.
Helps Devise a Pricing Strategy Any change in selling price can affect the break-even point. At this break even point of units, Crave Limited will succeed in meeting the both its Fixed and Variable expenses of the business.
Helps in Budgeting and Setting Targets Since you know at which point you can break-even, you accordingly can set budgets.