Explain why pricing and production are extent decisions and not decisions that should be tackled with break-even analysis. Does the same apply for investment decisions? Provide a rationale to support your response.
Sample Solution
Pricing and production are important decisions as they have a direct impact on a company’s profitability. Pricing is used to determine the amount of money that customers will pay for products or services. It should be set at a level that allows the company to cover its costs while still making a profit. Production, on the other hand, involves selecting which products or services to produce, determining how much of each should be produced and deciding on the most cost-effective methods for producing them. By carefully evaluating these two aspects of business operations, companies can ensure that their pricing and production strategies are profitable in the long run. In addition, being aware of market trends can help businesses stay ahead of competition by keeping prices low while maintaining quality output.