Interactive Model 2.1: Breakeven Analysis

Beakeven Analysis is introduced in Chapter 2 as a method for selecting among resource investment alternatives. It is commonly used in situations where the resources being analyzed offer different fixed costs and different variable costs per unit.  Each cost curve is defined as a straight line. The approach requires that the intersections of the curves be identified algebraically.  A graphical representation is valuable to aid in understanding the result. This module provides an interactive representation for a three-alternative decision scenario on a new facility. You can change fixed and variable costs of each alternative line by dragging the colored dots on the left and right of the line to see the impact on the output graph. You also can drag the "n" line to investigate the three costs for any value of n. As you drag the lines, all the related quantities are changed accordingly. These quantities are shown on the right of the graph.