Breakeven analysis (BEA) model should be used for making capacity decisions.

Question

Quizplus · Accepted Answer

Breakeven analysis (BEA) model is a critical tool used for determining the level of output at which the revenue generated matches the total cost incurred. This analysis helps to determine the level of production necessary for a company to cover all its costs and begin to make a profit. Thus, it is an essential tool for managers to use when making capacity decisions, i.e., deciding on the level of production or services that a business should operate to achieve profitability. Therefore, the statement is true.

Breakeven Analysis (BEA) Model Should Be Used for Making Capacity