How is break-even useful in analyzing Cost-Volume-Profit relationships?

Answer 1

In manufacturing, breakeven is used to determine the exact point where the sales volume profits equals the costs to manufacture. This point is the --minumum-- number of items that must be manufactured and sold for the company to sustain operations (pay the bills). The profits from all items manufactured and sold after that add to the total equity of the company. To summarize, breakeven is simply used to determine the minimum volumes the business needs to make and sell (or buy and sell if a retail business) to be a viable business.