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A critical part of CVP analysis is the point where total revenues equal total costs (both fixed and variable costs). At this break-even point, a company will experience no income or loss. This break-even point can be an initial examination that precedes a more detailed CVP analysis.
The Break-Even Point can alternatively be computed as the point where Contribution equals Fixed Costs. The quantity, ( P − V ) {\displaystyle \left(P-V\right)} , is of interest in its own right, and is called the Unit Contribution Margin (C): it is the marginal profit per unit, or alternatively the portion of each sale that contributes to ...
These diagrams - and the associated modelling - are then used to determine a break-even point ("cash flow neutrality"), or to further, and more generally, analyze operations and profitability. See cashflow forecast and operating cash flow.
The break-even analysis determines the point which the business's revenue is equivalent to the costs required to receive that revenue. It first calculates a margin of safety (the point which the revenue exceeds the break-even point) as that is the "safe" amount which the revenue can fall whilst still remaining to be above the break-even point. [30]
In Cost-Volume-Profit Analysis, where it simplifies calculation of net income and, especially, break-even analysis.. Given the contribution margin, a manager can easily compute breakeven and target income sales, and make better decisions about whether to add or subtract a product line, about how to price a product or service, and about how to structure sales commissions or bonuses.
In nuclear fusion research, the term break-even refers to a fusion energy gain factor equal to unity; this is also known as the Lawson criterion. The notion can also be found in more general phenomena, such as percolation. In energy, the break-even point is the point where usable energy gotten from a process equals the input energy.
However, with no advance knowledge of how long one will be skiing, the breakeven point is unclear. A good algorithm will minimize the ratio of the cost when the number of days is known in advance to the cost when the number of days is not known in advance. [2] Ski rental [3] [4] is one example of this class of problem.
It is the unique solution to a two-person bargaining problem that satisfies the axioms of scale invariance, symmetry, efficiency, and independence of irrelevant alternatives. According to Paul Walker, [3] Nash's bargaining solution was shown by John Harsanyi to be the same as Zeuthen's solution [4] of the bargaining problem.