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of the Faculty of Business Administrationthe requirements for the successful completion ofBreak-even point Thats the magic number that tells you when your revenue will cover your expenses which is being used by experts for over 25 years Although entrepreneurs often fail to realize the significance of recognizing and reaching the break-even point in the financial cycle understanding what it takes to break even is critical to making any business profitable Thompson 1 and 4 Break even directly relates to marketing because marketing managers are accountable for the impact of their actions on profits Therefore a working knowledge of basic accounting and finance is important to make decisions among various alternatives Kerin and Peterson 33 Several decisions are aided by this technique of analysis such as those related to pricing and machinery or equipment purchasing etc because costs are incurred by all the activities that a business undertakes Amos 1 Therefore in business planning one might ask questions such as How much do I have to sell to reach my profit goal How will a change in my costs affect my income or What prices should I charge to allow for a planned amount of profit Hence all these questions can be answered by the simple use of contribution analysis As defined by Kerin and Peterson contribution analysis is defined as the difference between total sales revenue and total variable costs or on a per-unit basis the difference between unit selling price and unit variable costThe simplest and easiest application of contribution analysis is the break-even analysis that helps access relationships among costs prices and volumes of products and services Kerin and Peterson 37 The fundamental definition of Break-even Analysis suggests that it is a method of determining the relationship between total costs and total revenues at various levels of production or sales activity Dubrin 154 The principle idea behind break-even analysis is that all costs are variable fixed or a combination of both Break-even point
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