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Analyse the importance of the break even analysis in supporting the achievement of strategic aims and objectives.

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Introduction

M2 Analyse the importance of the break even analysis in supporting the achievement of strategic aims and objectives. Break even happens when sales and total costs are the equal, meaning that no profit or no loss is made in the business. To find out the break even point we can use two ways, one by using the break even formula which is FC/ SP - VC, and the other way is to plot a break even graph which consists of three lines which are the fixed cost; costs that can not be changed, sales revenue; the sale that a business makes, and the variable costs; the costs that can change varying on other things in the business. The break even point on the graph in the point where the sales revenue and total costs met. It is very important for a business to know where they are breaking even so that they know how many items they would need to sell. Break even also helps managers to maintain their costs and know how it would affect their consumers because if certain prices goes higher or lower than a consumer ...read more.

Middle

This will lead the business to expand their business (achieving an other aim) because they will be making enough money and also getting financial investors to invest, helping the business to reinvest the profits they made into opening new store around other areas. Break even can also help achieve the aim of expanding by looking at the break even graph and identifying the margin of safety area (the area that is above the breakeven point) meaning that the business is making a profit and to see weather they can use those profits into investing them into opening new stores or making the existing store more wider. As management plays a vital role in the business they need to make sure that they carry out the right and correct decisions for the business because if they don't then the business will be affected in many ways like if the manager at M & S says that they are going to higher their selling price this will affect the business in a bad way because many customers will not be attracted as they would be able to get cheaper process from other places plus a good quality product, so why shop from M & S if their prices are too high. ...read more.

Conclusion

advertise the business meaning that the customers will gain even more customers again meaning that the business will break even quicker and make a profit and will also stay competitive amongst other competitors. Profit maximisation can be achieved by trying to sell more items but then they need to make sure that those items are of good quality so that it can allow the business to sell more and more meaning that the business is making a profit. If the quality is good more customers will be attracted and the business will gain a place in the market. To maximise profit also the business should know how many items they need to sell meaning going back to the break even and checking how many units to sell to break even. A business can also maximise profit by cutting down on unnecessary raw materials so that they can keep the costs low. If the costs are kept low then the business will be able to breakeven and also be able to make a profit. ?? ?? ?? ?? BTEC National Diploma in Business Unit 1: Introduction to business 1 Katharine Dent ...read more.

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