Question

Discuss how the breakeven point can be used to improve the performance of a factory operation

Answer 1

Break-even point can be determined by computation of the point at which received revenue equals the total costs associated with the production of the goods or services. It provide a easy however powerful quantitative tool for management. The break-even point provides insight into whether or not revenue earned from a product or service holds the ability to cover the relevant production cost of that service or product. This information can be used by the management information in making a wide range of business decisions, inclusive of price setting, preparing competitive bids, and for applying the loans. It provides managers a quantity to compare to the forecast of demand. When break-even point lies above anticipated demand, then there is an expected loss on the product, the management can use the information for making variety of decisions. The product or service may be discontinued or, on contrary may receive additional advertising and/or be re-priced for enhancement of the demand, thus helps to improve the performance of a factory operation