Breakeven analysis for outsourcing is used to determine what?

Breakeven analysis for outsourcing is utilized to identify the output level at which total costs equal total revenue. This point is crucial for businesses considering outsourcing because it helps determine the minimum volume of production needed to cover all associated costs, without incurring a loss.

Understanding this concept helps organizations make informed decisions about whether to outsource a function or produce it in-house. If the output level is below this breakeven point, the operation will result in losses, whereas operating above this level indicates profitability. Hence, this analysis can guide management on whether diving into outsourcing is financially viable based on expected production levels and associated costs. The breakeven point serves as a critical metric in assessing risk and potential profitability from outsourcing.