Advantages of Break Even Analysis

1. It provides detailed and clearly understandable information to the management because it gives the simple presentation of company's cost, volume, and profit structure.

2. Profitability of the different products and that of the business is also known, which helps the management in taking some important decisions such as continuation or closure of loss-making product per month or temporary shut down of the business, etc.

3. The break even chart shows the relative importance of the fixed cost in the total cost of the product and thereby exercises cost control.

4. It is useful for studying the relationship among the cost, volume, and profits and helps in showing the effect on profit in case of change in fixed costs, variable costs, selling price and sales volume.

5. Break even analysis is very helpful for forecasting costs, profits of various products, long-term planning, growth and stability.

6. A most profitable product mix can be chosen by studying the profitability of various products.

7. The break even point and the angle of incidence indicate the profit potentialities of the product.

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