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Productivity can be analyzed in terms of a breakeven analysis. But there are two general ways to consider Breakeven. The first way is based on a product and its price, costs, and volumes, which is a special case of Cost-Volume-Profit analysis. This method utilizes the profit equation:
Profit = Price * Volume – Variable Costs * Volume – Fixed Costs.
Note that Price and Variable Costs are both on a per unit basis. To determine the breakeven point, profit is set equal to zero, and the equation is solved for Volume.
BE = (Fixed Costs) / (Price – Variable Costs)
The second method of doing breakeven analysis is to compare alternatives that have Fixed Costs and Variable costs and determine the volume at which these total costs for each is equal to zero.
Fixed Costs[a] + Variable Costs[a] * Volume = Fixed Costs[b] + Variable Costs[b] * Volume
Note that Variable Costs are on a per unit basis. Solving for the BE volume:
BE = (Fixed Costs[a] – Fixed Costs[b]) / (Variable Costs[b] – Variable Costs[a])
Download this PowerPoint that provides more details and examples. [Breakeven Analysis PPT]
After reviewing the examples in the PowerPoint, download this Excel file that has the examples along with the exercises for you practice. [Breakeven Calculator]
]. You can use this Excel Breakeven Calculator for the Case 5 problem.
Once you have mastered these examples and exercises you should be ready to analyze the EBBD situation and develop a solution.
SLP 5 RESOURCES
Lynch, Clifford. (2010). Top Ten Logistics Challenges for 2011 (and Beyond) . Retrieved from http://www.dcvelocity.com/articles/2010121310_logistics_challenges_in_2011/
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