What does it mean in economics, what does it mean to break?

In economics, the term "broken" refers to the point at which the cost of the company equals its income. At the turning point, the profit equals zero and any income over this point will contribute to profits. Understanding a breakpoint in any operation is critically important because it calculates the minimum amount of income that it must be made to meet the costs.

A turning analysis can be performed to see what costs will be equal to the income. The performance of this type of analysis can not only provide a business, household or even the government level for which it can shoot, but can also affect different decisions, from order size to selling price. Without having clear data about the moment when revenue and costs are equal, the organization never has to know whether they are in money or in red. In terms of costs, there are generally two categories: solid and variable. Fixed costs include things that are exactly the same amount, each cost cycle, such as monthly rent on the facade. BoilIable costs are costs that can fluctuate up and down, such as public services. In the manufacturing company, fixed costs may include the price of materials per unit, while variable costs can be a payroll of an employee as soon as overtime is considered.

Revenue is based on the amount of goods or services sold and the price for which they are sold. If an employee of the spa provides 10 deductions for $ 45 (USD), five manicure for $ 20 and four pedicures for $ 15 per week, its weekly income (10x45)+(5x20)+(4x15) or $ 610 will be. In general, however, the analysis is performed without data on how many units have been sold; Mostly analyzes should determine how many units need to be sold at current prices to match costs. Therefore, if the hairdresser Weekly was $ 400, he or she would have to sell a combination of precipitation, manicure and pedicure that corresponded or exceeded this amount.If its total income consistently dropped below the total cost, it would have to consider a reduction in costs or price increases.

Unfortunately, cost reduction or raising prices cannot always bring an accurate change to profitable margins. If the hairdresser increases the prices too far, it can lose clients who are not willing to pay the bonus. Reducing costs could mean providing a lower quality product that can disrupt customer support and loyalty. Businesses often have to develop hybridized strategies that allow them to still provide a good product without taking over clients; Rather, achieving a turning point may be the result of a number of incremental changes than one major strategic shift.