Q. Explain Break-even analysis?
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Cost-volume-profit (CVP) analysistracks that how profit changes when there are changes insales price, variable costs, fixed costs &quantity.
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It is a good illustration of "what if? "Analysis and it in particular looks at sales minus variable costs which is termed as contribution.It permits management to understand the level of sales needed to cover all costs of a project and what level of sales is required start making profits.To break even would mean that an organisation would be earning no profit and no loss.
Sales revenue = All variable and fixed cost
Main assumptions in this model are thatfixed costs, selling price and variable costs are constant.