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Break-Even Use In Management Decision-Making

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How can break-even be used in management decision-making?

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The solution discusses break-even use in management decision making.

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Breakeven analysis can be a very useful and relatively simple tool for management to use in making decisions. It can be used for dealing with unknown variables such as demand. By specifying the levels of known variables such as cost or profit, a required or minimum level can be found for the unknown variable. Any problem requiring income estimation can be set up so that the most difficult variable to estimate is isolated for solution.

The major problem with breakeven analysis is that no project really exists in isolation. There are alternative uses for the firm's funds in every case. For example, in a manufacturer's case, a vacant plant could be leased to another company for some return. It could also be used for another product. We, must, therefore, always consider ...

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