In: Operations Management
Menen Quality Manufacturers has recently hired a new manager called Mr Freddy who is in charge of both production and sales of products. You had a chance to meet Mr Freddy and discussed cost-volume-profit analysis. During the discussion, Mr Freddy told you that his focus for the coming five years is to put some effort in order to achieve breakeven point so that the company achieves its objectives. He said nothing is needed beyond that and asked you to express your opinion on his position. Do you agree with his plan? Briefly explain why or why not.
The Break-even point is the point where total expenses equal to the total revenue. Let us understand this by the given graph.
The following interpretations are drawn from the above graph.
Conclusion
The focus of Mr teddy only on BEP and nothing is a need beyond that is not a correct concept. Because after achieving the BEP the company starts earning. The company suffers loss below BEP .During 5 years if Mr Teddy achieve the BEP means that he has covered up the losses ,now whatever will he achieve beyond BEP will be a profit for the company.