Answer :
A) In break-even analysis, the contribution margin is defined as price minus variable cost.
In a break-even analysis, a company's margin of safety is determined and compared against the income received and related expenses. To put it another way, the study shows how many sales are necessary to pay for operational costs. Through the analysis of various pricing levels in connection to various levels of demand, the break-even analysis determines what level of sales are necessary to pay the company's entire fixed costs. A demand-side analysis would considerably improve a seller's ability to close deals.
A stated optimal sales mix or the volume of output can be determined using break-even analysis. External parties like investors, regulators, or financial institutions are not intended to use the metrics and computations employed in the study; rather, they are solely intended for use by a company's management. With this kind of research, the break-even point is determined (BEP).The break-even point is calculated by multiplying the total fixed production costs by the cost per unit less the variable production costs. No matter how many units are sold, a fixed cost is constant.
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