I need to determine what is meant by the term break-even point in regards to Managerial Accounting? I also need to name 3 approaches to break-even analysis and explain how each approach works.
Break Even point in managerial accounting:
The break-even point is defined as the point where sales or revenues equal expenses. There is no profit made or loss incurred at the break-even point. This figure is important for anyone that manages a business since the break-even point is the lower limit of profit when setting prices and determining margins. The break-even point becomes very important when calculating a strategy for net profit.
The break even point for a product is the point where total revenue received equals total costs associated with the sale of the product (TR=TC). A break even point is typically calculated in order for businesses to determine if it would be profitable to sell a proposed product, as opposed attempting to modify an existing product instead so it can be made lucrative. Break-Even Analysis can also be used to analyze the potential profitability of an expenditure in a sales-based business.
Break-Even Analysis can be used in the evaluation of the cost-effectiveness of a new expenditure for a ...