What is Break Even Analysis used for?

Break Even Analysis is primarily used to identify the point at which total revenues equal total costs, meaning there is no net profit or loss. This analysis helps businesses understand the minimum sales volume needed to cover fixed and variable costs associated with production or service provision.

By calculating the break-even point, businesses can make informed decisions about pricing, budgeting, and sales targets. It guides management in assessing whether a proposed business model is viable and assists in making strategic operational choices.

The other options relate to different aspects of business management. While pricing strategies can be informed by break-even analysis, the direct purpose of break-even analysis itself focuses specifically on understanding the sales needed to cover costs. Choosing distribution channels or tracking customer satisfaction involves different analysis and metrics, which are not the focus of break-even analysis.