MGIS 317 Lecture Notes - Lecture 5: Variable Cost, Fixed Cost, Operations Management

• School: University of Calgary
• Department: Management Information Systems
• Course: MGIS 317
• Professor: Ronald Schlenker

Document Summary

Lecture 5 break-even level of output = fixed costs. Charts can be redrawn showing potential new situation and this can then be compared with the existing position of the business. Care must be taken in making these comparisons, as forecasts and predictions are usually necessary. The usefulness of break-even analysis can be summarised as follows: Charts are relatively easy to construct and interpret. Analysis provides useful guidelines to management on break-even points, safety margins and profit/loss levels at different rates of output. Comparisons can be made between different options by constructing new charts to show. Break-even point of production: the level of output at which total cost equal total revenue neither a profit nor a loss is made. Break-even analysis can be undertaken in two ways: Fixed costs: will not vary in a short term the level of output which must be paid whether the firm produces anything or not.