What are the Advantages or uses of break even charts
Computation of break even point or presentation of cost volume and profit relationship by way of break even charts has the following advantages :
1) Information provided by the breakeven chart is in a simple from and is clearly understandable even to a layman the whole idea of the problem is presented at a glance.
2) The break even chart is very useful to the management for taking managerial decision because the chart studies the relationship of cost volume and profit at various levels of output. The effects of changes in fixed cost and variables costs at various levels of output and that of changes in the selling price on the profits can be depicted very clearly by way of break even charts.
3) The break even charts helps in very knowing and analyzing the profitability of different products under various circumstances.
4) A break even chart is very useful for forecasting (the cost and profits), planning and growth.
5) The break even charts is a managerial tool for control of costs as it shows the relative importance of fixed cost in the total cost of a product.
6) Besides determining the break even point profit at various levels of output can also be determined with the help of break even charts.
7) The break even charts can also be used to study the comparative plant efficiencies of business.