How do managers use break-even analysis?

Question

BlackTom AI · Accepted Answer

The question asks about the purpose of break-even analysis in managerial decision making. 
Option 1: 'To identify the elements of the marketing plan that will generate the best results' — Break-even analysis focuses on cost, revenue, and the output level at which profits are zero, not on identifying marketing plan elements or optimizing marketing effectiveness. This would require market research and marketing metrics rather than break-even math.
Option 2: 'To estimate demand for a product at different prices' — Break-even analysis does not directly estimate demand or price elasticity. Estimating demand at various prices is more aligned with demand forecasting or price experimentation; break-even focuses on covering costs at a given price and output level, not forecasting quantity demanded.
Option 3: 'To find a production quantity where, for a given price, costs are equal to revenues' — This correctly captures the core of break-even analysis: determining the output level at which total revenue equals total costs for a specified price, revealing the break-even point and the relationship between volume, cost, and profitability.
Option 4: 'To see how costs will change as a manufacturer gains experience producing a product' — This describes the learning curve or experience curve effects, which study how costs decline with cumulative production due to factors like improved efficiency, not the break-even calculation itself. Break-even analysis uses current cost and price data rather than modeling cost reductions from experience.
So, Option 3 is the accurate description of how managers use break-even analysis, while the other options describe related but distinct concepts (marketing optimization, demand estimation, and cost reduction through learning).

How do managers use break-even analysis?

View Explanation

Log in for full answers

Similar Questions

Question textA business sells a product for $250. Variable costs are $100 per unit and total fixed cost are $120,000. How many products business need to sell to break-even? Answer 1 Question 3[input] products

Profit alone Blank ______ how many units should be sold before a firm breaks even.

What term describes the point at which the number of units sold generates enough revenue to equal total costs?

At the break-even point, profits on the sale of a product are Blank ______.

You decide to start selling hypercars. You figure it will take $100,000,000 to start a factory. You plan to sell your cars for $2,000,000 each. Each car will cost about $1,000,000 to make. Your break-even point is:

TB MC Qu. 09-28 An example of goal-seek analysis... An example of goal-seek analysis is determining

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler