Assess the benefit of increasing costs

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Reference no: EM133201081

Assignment:

Pricing and production are extent decisions because manipulating them provides an ability to assess the benefit of increasing costs and provides an ability to maximize profitability. By having the ability to manipulate the various inputs, the analysis yields the ideal point at which expending resources has a rate of diminishing return with regard to revenues. This allows an organization to model advertising expenditures, staffing plans, expanding services, choosing between alternatives, etc. The ability to find the exact point at which profitability peaks is critical to a firm trying to determine where their resources should go, how much resources and what decisions should made.

Whereas break-even analysis Assumes that sales prices are constant at all levels of output and assumes production and sales are the same. This analysis gives a very static picture of a company's financial health and does not provide a mechanism to manipulate different inputs to determine the maximum profitability of a given strategy. The break-even analysis determine when a firm will no longer operate at a loss, the tool cannot be utilized to forecast future decisions about resource allocation and corresponding revenues/profits.

Reference no: EM133201081

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