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Rondell Pharmacy: Break-even and Cost Structure

1.) "Breakeven analysis isn't very useful to a company because companies need to do more than break even to survive in the long run." Explain why you agree or disagree with this statement.

2.) Rondell Pharmacy is considering switching to the use of robots to fill prescriptions that consist of oral solids or medications in pill form. The robots will assist the human pharmacists and will reduce the number of human pharmacy workers needed. This change is expected to reduce the number of prescription filling errors, reduce the customer's wait time, and reduce the total overall costs. How does the use of the robots affect Rondell Pharmacy's cost structure? Explain the impact of this switch to robotics on Rondell Pharmacy's operating risk.

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1.) Break-even analysis is not just about figuring out how to make zero profits. It is about recognizing risk. It is instructive for firms to know the "bottom end" of the profit range - in other words, how close are they to being in a position of losing money? This is the margin of safety concept - how close or far away are you from toggling to a loss situation? Break-even analysis is also well suited to a variation called target ...

Solution Summary

276 words and explains how breakeven has three uses and the robots would increase operating risk (and why). Everyday language is suitable for novice.