Question

What are the advantages and limitations of using break-even analysis to make decisions regarding which production process to utilize or whether to purchase the product or manufacture the product?

Answer 1

ANSWER

BREAK EVEN ANALYSIS

Break-even examination is the technique for investigating the benefits v/s cost volume in activities. Breakeven alludes to the state when there is no benefit or no Loss. This implies the all out expense of creation is being equivalent to add up to revenues at present creation levels.

ADVANTAGES of this strategy are:

1. It is a profoundly solid device in the executives. It takes into accounts the different creation level and benefits at different stages.

2. It endeavors to check the impact of an adjustment in costs on the benefit. The exhibition of benefit can be fundamentally improved.

3. It attempts to anticipate the impact of effectiveness and cost on organization benefit.

4. It examinations the fixed expense and variable cost connection and trie to get advantage from that.

5. It is an all encompassing instrument through which we can design, test, control and organize the creation and its exhibition in the market.

The LIMITATIONS of this strategy are:

1. It might accept the costs (selling) will be the equivalent.

2. It might be tedious (as an activity)

3. It is relevant to a solitary item.

4. It additionally expect that creation and deals are the equivalent.