Question

Table 11.8 An operations manager has narrowed down the search for a new plant for Burdell Industries to three locations. Fixed and variable costs follow. Location Fixed Cost Variable Cost A ​$100,000 ​$10 B ​$150,000 ​$7 C ​$200,000 ​$5 Use the information in Table 11.8 to determine the best statement. A. Location C is the best one if volumes are quite high. B. The breakminuseven quantity between C and B is more than​ 30,000 units. C. The breakminuseven quantity between A and B is less than or equal to​ 5,000 units. D. Location A becomes the most expensive place to produce at volumes in excess of​ 2,000.

Answer 1

Break-even analysis is a technique by which business identify the sales volume when the total cost and total revenue is equal. So, the company neither makes profit nor loss.

Break-even analysis is important for business because it help in drafting good business plan by determining cost structure and the volume required to cover the cost in order to make profit.