An Empirical Analysis of Break-Even Point Practices and Their Impact on Business Performance

Abstract

For decades, break-even analysis has been a key component in determining profitability, making pricing decisions, and planning production in management. Despite being widely used, there is a lack of empirical evidence about whether companies that consistently do break-even analyses outperform those that do not. This research examines the impact of break-even practices, including cost analysis, contribution margin review, and forecasting, on business success. Using financial data simulation and data collected from over 110 manufacturing and services companies, the research applies correlation and regression analysis, yielding the result that BEP practices improve performance in the companies participating in the research (β = .58, and p < .01) and that contribution margin analysis was the strongest of those. These results, while confirming cost-volume-profit (CVP) theory, demonstrate its application in contemporary digital financial theory and practices.