ARTICLE DESCRIPTION: Breakeven calculation approaches have been around for 70 years in their present form. Conventional wisdom asserts that enterprises produce goods for one standard cost and sell this at a previously identified optimum sales price to determine the highest profit.

MORE INFO: Breakeven Analysis - Part 2 Breakeven calculation approaches have been around for 70 years in their present form. Conventional wisdom asserts that enterprises produce goods for one standard cost and sell this at a previously identified optimum sales price to determine the highest profit. They thus ensure sufficient capacity to achieve this required volume. Hence, most entrepreneurs approach the problem by undertaking a series of breakeven calculations. This approach suggests an optimum production volume to maximise profit. The fundamental underlying perception is that manufacturing enterprises produce goods as independent entities. This article disputes this latter perception, presenting volume/profit data from a non-disclosed source as evidence.

PUBLISHER: Institute of Operations Management

Page number: 21 Word count: 2900

Vol 29 - No 08 - December 2003/January 2004

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