Quantitative Analysis for Management, 13/e

Key Equations

(M3-1)

$$\begin{array}{l}\text{Break-even}\text{point }\left(\text{in units}\right)\hfill \\ =\frac{\text{Fixed cost}}{\text{Price/unit}\text{-}\text{Variable cost/unit}}=\frac{f}{s-\text{v}}\hfill \end{array}$$

The formula that provides the volume at which total revenue equals total costs.

(M3-2) $Z=\frac{\text{Demand}-\mu }{\sigma }$

The number of standard deviations that demand is from the mean, $\mu .$

(M3-3) $\begin{array}{l}\text{EMV}\text{=}\left(\text{Price/unit}\text{-}\text{Variable cost/unit}\right)\hfill \\ \times \left(\text{Mean demand}\right)-\text{Fixed costs}\hfill \end{array}$

The expected monetary value.

(M3-4) $\begin{array}{lll}\text{Oppertunity loss}\hfill & =\hfill & \{\begin{array}{l}K\left(\text{Break-even}\text{point}\text{-}X\right)\hfill \\ \text{for}X\le \text{Break-even point}\hfill \\ \$0\text{for}X>\text{Break-even point}\hfill \end{array}\hfill \end{array}$

The opportunity loss function.

(M3-5) $\text{EOL}=K\sigma N\left(D\right)$

The expected opportunity loss.

(M3-6) $D=\left|\frac{\mu -\text{Break-even point}}{\sigma }\right|$

An intermediate value used to compute EOL.