Uses of cost information — common mistakes

When evaluating pricing in a case, combine cost floor with marketing (elasticity, competition, brand). Cost alone does not set the optimal price.

Long run: yes, or the business cannot survive. Short run: a promotional or special order may cover only variable costs if it contributes to fixed costs and does not displace better sales.

Break-even is one specific use of contribution-based cost information — finding the output where total contribution equals fixed costs.