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2.2.3 Break-even - Coggle Diagram

- - - - Assumes all output is sold, so that output equals sales and no stocks are held
      - Many businesses hold stocks of finished goods to cope with changes in demand
      - There are also times where businesses cannot sell what they produce and choose to stockpile their output to avoid laying off staff
    - - The break-even chart is drawn for a given set of conditions
      - It cannot cope with a sudden increase in wages and prices or changes in technology
    - - The effectiveness of break-even analysis depends on the quality and accuracy of data used to construct cost and revenue functions
      - If the data is poor or inaccurate, the conclusions drawn on the basis of the data are flawed
    - - It is assumed that the total revenue and total cost lines are linear or straight
      - For example, a business may offer discounts on large orders, so total revenues fall at high outputs
      - In this case, the total revenue line would rise and then fall, and be curved
    - - Many businesses produce more than one single product
      - It is likely that each product will have different variable costs and different prices
      - The problem is how to allocate the fixed costs of the multi-product business to each individual product
    - - Some fixed costs are stepped
      - For example, in order to increase output a manufacturer may need to acquire more capacity
      - This may result in rent increases and thus fixed costs will rise sharply