Ch.20 HW5-2 - 2 What options are available if the initial break-even calculations show that the company will be performing “below” the

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1. Explain why calculating a “break-even” point should be the first step for any potential business. Breakeven point is the point at which total revenues equal total costs. It’s very important for the company in order to make business. In other words, if the company knows the total revenue and total cost, they will know the breakeven point. The company should know the cost to breakeven, because if they pass breakeven point, they are going to get profit. Consequently, they have to calculate breakeven for the first step in order to know how much does the product cost so that they will reach the breakeven faster. As we know, if the company gets the breakeven, they will be ion the profit area.
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Unformatted text preview: 2. What options are available if the initial break-even calculations show that the company will be performing “below” the break-even point? Please explain? Definitely, when the breakeven point performs that it’s below the point, it means that the company is in the loss area so the company should find any policy in order to reach breakeven as fast as they can. In other meanings, if they can pass breakeven point, they will be in profit area. As a consequence, the company should find the breakeven per unit in order to find the breakeven in dollar. Then, they will know how much they sell which will reach the breakeven....
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This note was uploaded on 02/10/2011 for the course ACCOUNTING 202 taught by Professor William during the Winter '08 term at Edmonds Community College.

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