Using this technique, the decision-maker can determine the break-even point for the company as a whole, or for any of its products.
Break-even analysis is a measure by which the level of sales necessary to cover all fixed costs can be determined.
In recent years, computers have been used extensively for simulation.
The different variables and their interrelationships are put into the model.
One of the most significant sets of tools available for decision-makers is operations research.
An operation research (OR) involves the practical application of quantitative methods in the process of decision-making.
It is an accounting tool for interpreting accounting information.
At the break-even point, total revenue equals total cost and the profit is nil.
When using these techniques, the decision-maker makes use of scientific, logical or mathematical means to achieve realistic solutions to problems.
Several OR techniques have been developed over the years.