Decision Making - 1
DECISION MAKING
Submitted by Afzal muhammed International mba
COMPANY CAN TAKE SHORT TERM DECISION USING THE DECISION MAKING INDICATOR Break-even point
The break-even point may be defined as that point of sales volume at which total revenue is equal to total cost. It is the point of no profits no loss. A business is said to break-even when its total sales are equal to total costs.
Decision making in break-even point
It helps to take short term decision for company. The break-even point identifies the total amount of sales the business needs before profit can be earned. When analyzed closely, the break-even analysis also helps the business to identify excessive fixed costs. Since the break-even point is directly related to the fixed costs, reducing and controlling these costs aids the business in achieving a lower break-even point for quicker profitability.
Shut down point
Shut down point is the combination of output and price where a firm earns just enough revenue to cover tis total variable costs. If firm is operating at its shut down point, it’s usually operating at a loss. The concept is that if firms produce revenue greater or equal to its total variable costs, it can use the additional revenue to pay down its fixed cost.
Decision making in shut down point
Shut down involve following type of decision
If decision is to shut down, whether the closure should be permanent or temporary. Shut decision often involve shot term consideration and capital expenditure and revenue
Whether or not to close down a factory or other activity, either because it is making losses or because it is too expensive to run.
Shut down result in shaving in annual operating cost for number of years in the future.
Profit volume ratio
It is the ratio of the contribution to the sale of a concern.it is usually in percentage. It show relationship
Submitted by Afzal muhammed International mba
COMPANY CAN TAKE SHORT TERM DECISION USING THE DECISION MAKING INDICATOR Break-even point
The break-even point may be defined as that point of sales volume at which total revenue is equal to total cost. It is the point of no profits no loss. A business is said to break-even when its total sales are equal to total costs.
Decision making in break-even point
It helps to take short term decision for company. The break-even point identifies the total amount of sales the business needs before profit can be earned. When analyzed closely, the break-even analysis also helps the business to identify excessive fixed costs. Since the break-even point is directly related to the fixed costs, reducing and controlling these costs aids the business in achieving a lower break-even point for quicker profitability.
Shut down point
Shut down point is the combination of output and price where a firm earns just enough revenue to cover tis total variable costs. If firm is operating at its shut down point, it’s usually operating at a loss. The concept is that if firms produce revenue greater or equal to its total variable costs, it can use the additional revenue to pay down its fixed cost.
Decision making in shut down point
Shut down involve following type of decision
If decision is to shut down, whether the closure should be permanent or temporary. Shut decision often involve shot term consideration and capital expenditure and revenue
Whether or not to close down a factory or other activity, either because it is making losses or because it is too expensive to run.
Shut down result in shaving in annual operating cost for number of years in the future.
Profit volume ratio
It is the ratio of the contribution to the sale of a concern.it is usually in percentage. It show relationship