Question
CASE STUDY A lot of times management uses break-even analysis in order to price set and understand the economic impact of various pricing and sales.
CASE STUDY
A lot of times management uses break-even analysis in order to price set and understand the economic impact of various pricing and sales. Briefly, basically, pricing always matters. Profits grow faster when the right price is set for the products or services instead of increasing such volume in the business. Break-even analysis helps businesses when setting prices get complicated.
When I use break-even analysis to schedule my employees each day, we utilize a system used for staffing employees and try to set it up for needs and extra needs after. So, for up to twenty for the night shift in need of safety attendants, and for days I might need to set the matrix to show the needs of fifteen and so forth depending on the day and my patients who need assisted observation care round clock. (Gallo, A. 2014). It is easy to use the matrix along with the break-even analysis because it goes based on my patient's volume and when it does that it makes it easier to set my employees in the position on the matrix for staffing needs. the more patient cases I have the more profit is brought in because we profit off a case-by-case basis in utilizing my employee's department hours to help with costs of the volume and increased extra needs by offering incentive hours on top of regular hours when picking these department hours up. (Franklin, M., Graybeal, P., & Cooper, D 2019).
Using break-even analysis helps understand the staffing situations and make decisions on whether to increase the volume or set the matrix ratio in order to leave the volume as is and just staff according to the increase in the matrix staffing for departments to utilize the hours and incentives tools to keep profits at a high and volume at a leveled base to ensure profitable increase continues and the volume does not. Management can adjust what needs to be adjusted by the resources and effectiveness of the matrix staffing system we use. (Franklin, M., Graybeal, P., & Cooper, D 2019).
Considering an example in identifying elements considering improving the break-even analysis first gathering the numbers of hours the department has in staffing for paying out employees. Then the number of employees on the list each day and night shift to work these observed cases in the department and finally compare against the hours we have and the employees we have and balance the staffing sheet based on the results and if incentive hours are needed to be used then look at those as well and cap the hours of course so it doesn't lessen the profit when raising the needs that particular day.
Reference:
Franklin, M., Graybeal, P., & Cooper, D. (2019). 3.2 calculate a break-even point in units and dollars. InPrinciples of accounting, volume 2: Managerial accounting. OpenStax. https://openstax.org/books/principles-managerial-accounting/pages/3-2-calculate-a-break-even-point-in-units-and-dollars
Gallo, A. (2014, July 2).A quick guide to breakeven analysis.Harvard Business Review Digital Articles, 2-5. http://hbr.org
Questions:
- Provide an insight you gained from reading your colleague's example of how understanding the break-even point would help with decision-making.
- Offer additional ideas for what elements your colleague could change to improve the break-even point.
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