Question

which of the following method of capital budgeting is application of break even concept
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Answer 1

Answer:

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Explanation:

Break-even analysis is most useful when used with partial budgeting or capital budgeting techniques. The major benefit to using break-even analysis is that it indicates the lowest amount of business activity necessary to prevent losses.

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Answer 2

The best results from break-even analysis come from combining it with capital budgeting or partial budgeting strategies.

• The main advantage of break-even analysis is that it shows how costs, output, and returns are related.
• It can be developed to show how changes in commodity prices, revenue, or the relationships between fixed costs and variable costs might affect profit margins and break-even points.
• Break-even analysis has a number of downsides, including that it is most effective when analysing a single product at a time, that it may be difficult to classify a cost as fully variable or entirely constant, and that it works best when doing so.
• Even when the cost and income functions have changed, there is sometimes a propensity to continue using a break-even analysis.

Break-even analysis works best when combined with capital budgeting or partial budgeting techniques. The fundamental benefit of using break-even analysis is that it illustrates the absolute minimum amount of economic activity needed to prevent losses.

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