Different applications of breakeven analysis


Problem: You recently read a newspaper article about how the majority of businesses fail in their very first year. To minimize the possibility of this happening to you, you decide to use a breakeven analysis. You know it is a very useful and powerful tool not only for new businesses, but as an ongoing tool for the managers of a firm. At your next management meeting, discuss the following topics:

- At least 3 different applications of breakeven analysis

- The importance of only considering relevant versus irrelevant costs in analysis and decision making, using at least 1 example to demonstrate your point

- The challenge of, and how to handle, the mixed (i.e., semi-fixed or semi-variable) cost category.

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