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Pricing and productivity are extent decisions are considered as decisions that should not be tackled by break-even analysis, because the break-even analysis, although easy to compute, can produce wrong answers. “Break-even analysis can give you the wrong answer as it ignores the time value of money” (Froeb, et al., 2018). Break-even analysis will show the company what revenue it will take to cover their expenses and “break-even”. However, this analysis does not equate the time it will take to produce this money, nor does it put into recognition of possible disruptions or outside factors. Extent decisions of price and productivity look into what the costs will be in order to produce another good, labor required to produce, and what the price on the good will do to the company profits. What more will have to go in and what depiction the product price will have are what is viewed in order to help generate the revenue. Now on the other hand, I think it is fair to say that an investment decision would also inquire on pricing and production, because their is no limitation involved with an investment decision. Investment decisions are looking for the best possible way to invest in assets to produce the highest possible value. There is no limitation to an investment decision making pricing and productivity relevant. The price decision would bring in revenue that could be attractive to an investor to make their decision and ability of investment. Additionally, the firm is looking for ways to pay their investors the best they can so where the firm decides to put its money and productivity could influence the return back. Break-even analysis is simply looking for the bare minimum they need to cover their costs and that does not fully cover the idea of pricing and productivity decisions.
Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2018). Managerial economics: A problem solving approach (5th ed.). Cengage Learning. ISBN-13: 9781337106665
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