break even model
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4. Explain the break even model and how it impacts corporate planning. Give an example of a commonly used break-even model
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Solution Summary
The solution explains the break even model and how it impacts corporate planning.
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The purpose of breakeven analysis is to determine the quantity of output that results in zero earnings before interest and taxes. This process requires the study of the firm's cost structure, volume of output, and profit.
A breakeven model can help determine the minimum output necessary to cover all operating costs as well as predict the earnings before interest and taxes that will be achieved at various levels.
Benefits of Break Even Analysis
o Capital expenditure analysis
o Pricing policy
o Labor costs
o Firm's cost structure
o Financing decisions
Elements of Break Even Analysis
o Separate production costs into two categories including fixed costs and variable costs.
Development of a ...
Education
- BCom, SGTB Khalsa College, University of Delhi
- MBA, Rochester Institute of Technology
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