Business Essentials (11th Edition)
Business Essentials (11th Edition)
11th Edition
ISBN: 9780134129969
Author: Ronald J. Ebert, Ricky W. Griffin
Publisher: PEARSON
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Chapter 12, Problem 12.1QR
Summary Introduction

To explain: How do break-even analysis aid managers to measure the potential impact of prices.

Introduction:

Break-even analysis:

A break-even analysis will aid a firm to calculate the sales volume at which the variable and fixed costs needed to develop a product are recovered. It is the point at which a product starts to generate profits.

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Explanation of Solution

Ways how do break-even analysis aid managers to measure the potential impact of prices:

Break-even analysis and the concept of cost-oriented ricing are clubbed together to analyze the impact of the pricing objectives and the cost before deciding on the final price of a product. These tools will aid the managers in identifying the prices that will enable the firm to achieve their objectives. Break-even analysis primarily helps to quantify the sales volume at which the firm will cover the production costs and begin generating profits.

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