Why is it important to understand the importance of break-even analysis in a business?

Question description

Question 1:

Given the following information: determine;

Selling Price $17
Fixed Expenses
Selling & Administrative $130,000
Interest Expense $10,000
Variable Expenses
Cost of goods Sold $4
Selling and Administrative $3
  • What is the company’s contribution margin?
  • What is the break-even points in units?
  • If the company wants to earn a profit of $42,000 instead of breaking even, what is the number of units the company must sell?
  • Why is it important to understand the importance of break-even analysis in a business?
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