Consider the concepts of break-even and profit-loss analysis. Define fixed and variable costs. Now provide real life examples as to each of the costs.
Discuss the importance of using linear programming. Provide a business example as to how this type of analysis can be used.
If businesses want to become profitable, they must know their break-even point. It is the point where total revenue equals total costs. Examples of fixed costs include rental payments, salaries, and property taxes because they rarely change. Sales commission and wages on temporary employees are some examples of variables costs. Linear programming is beneficial to organizations because it allows businesses to deal with resource constraints. It helps in both maximizing and minimizing solutions based on what an organization wants.