What is the main objective of break-even analysis?

The main objective of break-even analysis is to determine the level of sales needed to cover total costs. This analysis helps businesses identify the point at which total revenues equal total costs, meaning the business is not making a profit but also not incurring any losses. Understanding this break-even point allows management to make informed decisions regarding pricing, budgeting, and financial planning. By calculating how many units of goods or services must be sold at a given price to cover fixed and variable costs, businesses can set sales targets and understand the implications of their operational decisions on profitability. This vital information aids in evaluating the viability of projects and is essential for strategic planning.