Evaluate Break-Even Analysis as a Decision-Making Tool

3. 3 Evaluate break-even analysis as a decision-making peter. The definition of the Break-even analysis The break-even analysis is an analysis of a product or companys sales agreements required to neither lose gold nor make a profit, but simply to cover costs. Explain in mathematical term total revenues total costs = 0. The methods By victimization a break-even formula or by drawing a break-even chart. why is it so important using a break-even analysis?Because it gives critical knowledge about a business or a companys financial status, not just for a simple break-even point. For start-up businesses, it determines how businesses are setting-up prices for their projections to contact a reasonable level of break-even point and safety margin. For an on-going business, it equally vital for review analysis and forecast its break-even point as, how can it improve the blood between fixed costs, variable costs and revenues and justify a chastise decision to achieve an ultimate result for a healthy business.Although its simple and easy to set-up, yet fundamentally its an essential decision-making tool for analysing all forms of businesses. For example 1. Increase prices to raise total revenues, it creates a humiliate break-even point and better safety margin. 2. Reduce fixed costs or variable costs and prices remain the same also can land the break-even point. 3. Reduce selling prices and variable costs to generate more sale revenues equally it can lower the break-even point.