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Sensitivity and Break-even Analyses

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Describe how Sensitivity Analyses interact with Break-even Analyses.

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Solution Summary

The solution discusses the relationship between sensitivity and break-even analyses.

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Break even point

Break even quantity = Fixed costs/Contribution per unit
Here contribution per unit= Sales per unit -Variable cost per unit
Break even point is the point at which gains equal losses.
Break-even analysis is basically an analytical technique for studying the relations between:

* fixed costs;
* variable costs; and
* profits.
Break-even analysis is a device for determining the point at which sales will just cover total costs.
or the break even point for a product is the point where total revenue received equals total costs (TR=TC). A break even point is typically calculated in order to determine if it would be worthwhile to sell a proposed product, or to try to figure out ...

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