Uses of Break-even Analysis
Following are some of the uses of Break-even Analysis:
1. Change in Business Model: When a company is changing business models like shifting from wholesale business to retail business or shifting from retail business to wholesale business, break-even analysis will help the business in deciding the selling price of the product.
2. Expansion of Business: If a company is deciding to expand its business or launch a new product, the company will do the break-even analysis first to decide on the selling price of the product.
3. Lowering Prices: Sometimes, businesses need to lower down the price of their product so that they can increase their sale and beat the competitors. So, when lowering pricing, businesses need to figure out how many more units they need to sell to offset or make up a price decrease.
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