ABSTRACT
Break-even analysis is key to any good business decision. Break-even analysis helps engineers and businesses to understand if a project or business venture is worth the risk. The break-even analysis has been updated and extended for the use in more business situations. The break-even analysis is an inexpensive tool used to evaluate the payback period of a project. Key terms associated with the break-even analysis are: fixed cost, variable cost, unit price. Variable costs are expected to change accordingly with the level of activity within the company. Variable costs tend to increase or decrease in direct correlation with the volume of production within the company. Break-even analysis is critical for any business because the break-even point allows the business to see the lower limit of profit. Understanding the break-even point allows the business to set profit margins according to capital spent.
