Question
Please comment on these two paragraphs separately! The break-even point occurs when a business's total revenue and cost are equal. It plays a crucial role
Please comment on these two paragraphs separately!
The break-even point occurs when a business's total revenue and cost are equal. It plays a crucial role in business benchmarks that enable the company to ensure long-term planning. The break-even point assists businesses to know the product quantity they must sell to attain profitability out the profitability. It also helps in coming up with pricing strategies that ensure business costs are covered by the companys profits. As a staff accountant, I would feel obliged to answer what if questions from the manager so as to help in advocating for practices that could enhance the companys profitability.
It is extremely important for a business to know its breakeven point primarily so they make and sell enough product to cover all costs and not operate at a loss. This number is also important to build sales commissions structures so that a enough sales to hit breakeven will be the baseline to stay on the team and different levels above that will earn bonuses. As a staff accountant in charge of CVP calculations my entire job would be to field the higher ups "what if" questions. Much of cost accounting involves projections for future projects. If I didn't want to deal with "what if" questions Id be a regulatory accountant.
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