Advantages and disadvantages of break-even analysis?

Break-even analysis is a method of analyzing the balance of project costs and benefits through the break-even point (BEP). Various uncertainties (such as investment, cost, sales volume, product prices, project life, etc.) changes will affect the economic effects of investment programs, when the changes in these factors reach a certain threshold, it will affect the program trade-offs. The purpose of the break-even analysis is to find this critical value, that is, the break-even point (BEP), to determine the investment program on the uncertainty of the ability to withstand changes in the factors, to provide a basis for decision-making. The lower the break-even point, the greater the possibility of profitability of the project, the smaller the possibility of loss, and thus the project has a greater ability to resist business risks. Because the break-even analysis is to analyze the relationship between production (sales), cost and profit, so it is called quantitative cost-benefit analysis. The break-even point is expressed in a variety of forms. It can be expressed in terms of physical production, selling price per unit of product, variable cost per unit of product, and total annual fixed costs, or in terms of relative quantities such as capacity utilization (break-even point rate). Among them, production and capacity utilization, is to carry out project uncertainty analysis in the more widely used. According to the cost of production, sales revenue and production (sales volume) is a linear relationship between, break-even analysis can be divided into: linear break-even analysis and non-linear break-even analysis. 1. The need for uncertainty analysis Techno-economic analysis is based on the analyst's prediction and determination of future things. Due to the uncertainty of the change of factors affecting the effect of the program, the limitations of the prediction method and working conditions, so that the prediction data has a certain degree of error. Error makes the program analysis of the economic effect of the actual value of the deviation from the expected value, so that the investment has a risk, how to evaluate the risk, so that the investor has a certain understanding of the risk, preparedness, to take certain measures and means to avoid the risk or reduce the risk. 2. Uncertainty analysis concept: analyze the impact of uncertainty factors on the economic evaluation indicators, estimate the risk that the project may bear, to determine the economic reliability of the project. 3. Methods of uncertainty analysis: including break-even analysis, sensitivity analysis, probability analysis.