ABSTRACT
This chapter introduces another method for comparing economic alternatives known as breakeven analysis. Breakeven analysis provides information to decision makers on the number of units of production per year where one alternative begins to have a higher equivalent uniform annual worth than another alternative or an existing alternative. This chapter includes a graph with a plot showing the breakeven point for units of production per year for two alternatives that helps illustrate graphically the breakeven point between two alternatives. To help explain breakeven comparisons, this chapter includes information on fixed and variable costs as they relate to the calculations performed for breakeven comparisons. The procedures for determining the breakeven point when comparing alternatives are explained and solved example problems and a case study are included, which demonstrate the process for calculating the breakeven point.
