Mary Williams, owner of Williams Products, is evaluating whether to introduce a new product line. After thinking through the production process and the costs of raw materials and new equipment, Williams estimates the variable costs of each unit produced and sold at $6 and the fixed costs per year at $60,000. If the selling price is set at $18 each, how many unit must be produced and sold for Williams to break even? Use both graphic and algebraic approaches to get your answer. Williams forecasts sales of 10,000 units for the first year if the selling price is set at $14 each. What would be the total contribution to profits from this new product during the first year? If the selling price is set at $12.50, Williams forecasts that first-year sales would increase to 15,000 units. Which pricing strategy ($14.00 or $12.50) would result in the greater total contribution to profits? What oilier considerations would be crucial to the final decision about making and marketing the new product?

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Answer 1

Textbook Question

Chapter A, Problem 1P

Mary Williams, owner of Williams Products, is evaluating whether to introduce a new product line. After thinking through the production process and the costs of raw materials and new equipment, Williams estimates the variable costs of each unit produced and sold at $6 and the fixed costs per year at $60,000.

If the selling price is set at $18 each, how many unit must be produced and sold for Williams to break even? Use both graphic and algebraic approaches to get your answer.
Williams forecasts sales of 10,000 units for the first year if the selling price is set at $14 each. What would be the total contribution to profits from this new product during the first year?
If the selling price is set at $12.50, Williams forecasts that first-year sales would increase to 15,000 units. Which pricing strategy ($14.00 or $12.50) would result in the greater total contribution to profits?
What oilier considerations would be crucial to the final decision about making and marketing the new product?

a.

Expert Solution

Summary Introduction

To calculate: The break even quantity using both graphic and algebraic approaches.

Concept Introduction: Break-even point is explained as a point where a company is earning no profits and incurring no losses reflecting that total cost is equivalent to total income.

Explanation of Solution

Given information:

Variable costs: $6 per unit

Fixed costs: $60,000

Selling price: $18 per unit

Break-even quantity: ?

Calculation of break even quantity:

Break even quantity(Q)=( Fixed costs Selling price−Variable costs)Q=$60,000$18−$6Q=5,000 units

Hence, the break even quantity is 5,000 units.

Graphic approach for calculating break even quantity:

Operations Management: Processes and Supply Chains, Student Value Edition Plus MyLab Operations Management with Pearson eText -- Access Card Package (12th Edition), Chapter A, Problem 1P

Fig (1)

b.

Expert Solution

Summary Introduction

To calculate: The total contribution to profits from this new product.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Explanation of Solution

Given information:

Forecasted sales: 10,000 units

Selling price: $14 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×10,000)−[$60,000+($6×10,000)]=$20,000

Therefore, the total contribution from the new product is $20,000.

c.

Expert Solution

Summary Introduction

To calculate: The total contribution to profits from this new product if selling price is $12.50.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Explanation of Solution

Given information:

Forecasted sales: 15,000 units

Selling price: $12.50 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($12.50×15,000)−[$60,000+($6×15,000)]=$37,500

Therefore, the total contribution from the new product is $37,500.

If selling price is $14 and forecasted sales are 15,000 units, then,

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×15,000)−[$60,000+($6×15,000)]=$60,000

It can be concluded that when selling price is $14 then it can get a greater total contribution to Company W.

d.

Expert Solution

Summary Introduction

To identify: The other considerations that would be crucial for final decision making for the new product.

Concept Introduction: Decision making is a process in which members of an organization select a particular course of action in response to both problem and opportunity. The objective of decision making is to gain a maximum and profitable result.

Explanation of Solution

Other considerations that would be crucial for final decision making of new product are:

Company W can identify and evidently state the problems.

Various other alternatives should be evaluated and for the same information should be collected.

Decisions are taken by organizations on the basis these procedures that are generally performed: break even analysis, decision tree, preference matrix and preference decision tree.

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Answer 2

Textbook Question

Chapter A, Problem 1P

Mary Williams, owner of Williams Products, is evaluating whether to introduce a new product line. After thinking through the production process and the costs of raw materials and new equipment, Williams estimates the variable costs of each unit produced and sold at $6 and the fixed costs per year at $60,000.

If the selling price is set at $18 each, how many unit must be produced and sold for Williams to break even? Use both graphic and algebraic approaches to get your answer.
Williams forecasts sales of 10,000 units for the first year if the selling price is set at $14 each. What would be the total contribution to profits from this new product during the first year?
If the selling price is set at $12.50, Williams forecasts that first-year sales would increase to 15,000 units. Which pricing strategy ($14.00 or $12.50) would result in the greater total contribution to profits?
What oilier considerations would be crucial to the final decision about making and marketing the new product?

a.

Expert Solution

Summary Introduction

To calculate: The break even quantity using both graphic and algebraic approaches.

Concept Introduction: Break-even point is explained as a point where a company is earning no profits and incurring no losses reflecting that total cost is equivalent to total income.

Explanation of Solution

Given information:

Variable costs: $6 per unit

Fixed costs: $60,000

Selling price: $18 per unit

Break-even quantity: ?

Calculation of break even quantity:

Break even quantity(Q)=( Fixed costs Selling price−Variable costs)Q=$60,000$18−$6Q=5,000 units

Hence, the break even quantity is 5,000 units.

Graphic approach for calculating break even quantity:

Operations Management: Processes and Supply Chains, Student Value Edition Plus MyLab Operations Management with Pearson eText -- Access Card Package (12th Edition), Chapter A, Problem 1P

Fig (1)

b.

Expert Solution

Summary Introduction

To calculate: The total contribution to profits from this new product.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Explanation of Solution

Given information:

Forecasted sales: 10,000 units

Selling price: $14 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×10,000)−[$60,000+($6×10,000)]=$20,000

Therefore, the total contribution from the new product is $20,000.

c.

Expert Solution

Summary Introduction

To calculate: The total contribution to profits from this new product if selling price is $12.50.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Explanation of Solution

Given information:

Forecasted sales: 15,000 units

Selling price: $12.50 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($12.50×15,000)−[$60,000+($6×15,000)]=$37,500

Therefore, the total contribution from the new product is $37,500.

If selling price is $14 and forecasted sales are 15,000 units, then,

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×15,000)−[$60,000+($6×15,000)]=$60,000

It can be concluded that when selling price is $14 then it can get a greater total contribution to Company W.

d.

Expert Solution

Summary Introduction

To identify: The other considerations that would be crucial for final decision making for the new product.

Concept Introduction: Decision making is a process in which members of an organization select a particular course of action in response to both problem and opportunity. The objective of decision making is to gain a maximum and profitable result.

Explanation of Solution

Other considerations that would be crucial for final decision making of new product are:

Company W can identify and evidently state the problems.

Various other alternatives should be evaluated and for the same information should be collected.

Decisions are taken by organizations on the basis these procedures that are generally performed: break even analysis, decision tree, preference matrix and preference decision tree.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Textbook Question

Chapter A, Problem 1P

Mary Williams, owner of Williams Products, is evaluating whether to introduce a new product line. After thinking through the production process and the costs of raw materials and new equipment, Williams estimates the variable costs of each unit produced and sold at $6 and the fixed costs per year at $60,000.

If the selling price is set at $18 each, how many unit must be produced and sold for Williams to break even? Use both graphic and algebraic approaches to get your answer.
Williams forecasts sales of 10,000 units for the first year if the selling price is set at $14 each. What would be the total contribution to profits from this new product during the first year?
If the selling price is set at $12.50, Williams forecasts that first-year sales would increase to 15,000 units. Which pricing strategy ($14.00 or $12.50) would result in the greater total contribution to profits?
What oilier considerations would be crucial to the final decision about making and marketing the new product?

a.

Expert Solution

Summary Introduction

To calculate: The break even quantity using both graphic and algebraic approaches.

Concept Introduction: Break-even point is explained as a point where a company is earning no profits and incurring no losses reflecting that total cost is equivalent to total income.

Explanation of Solution

Given information:

Variable costs: $6 per unit

Fixed costs: $60,000

Selling price: $18 per unit

Break-even quantity: ?

Calculation of break even quantity:

Break even quantity(Q)=( Fixed costs Selling price−Variable costs)Q=$60,000$18−$6Q=5,000 units

Hence, the break even quantity is 5,000 units.

Graphic approach for calculating break even quantity:

Operations Management: Processes and Supply Chains, Student Value Edition Plus MyLab Operations Management with Pearson eText -- Access Card Package (12th Edition), Chapter A, Problem 1P

Fig (1)

b.

Expert Solution

Summary Introduction

To calculate: The total contribution to profits from this new product.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Explanation of Solution

Given information:

Forecasted sales: 10,000 units

Selling price: $14 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×10,000)−[$60,000+($6×10,000)]=$20,000

Therefore, the total contribution from the new product is $20,000.

c.

Expert Solution

Summary Introduction

To calculate: The total contribution to profits from this new product if selling price is $12.50.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Explanation of Solution

Given information:

Forecasted sales: 15,000 units

Selling price: $12.50 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($12.50×15,000)−[$60,000+($6×15,000)]=$37,500

Therefore, the total contribution from the new product is $37,500.

If selling price is $14 and forecasted sales are 15,000 units, then,

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×15,000)−[$60,000+($6×15,000)]=$60,000

It can be concluded that when selling price is $14 then it can get a greater total contribution to Company W.

d.

Expert Solution

Summary Introduction

To identify: The other considerations that would be crucial for final decision making for the new product.

Concept Introduction: Decision making is a process in which members of an organization select a particular course of action in response to both problem and opportunity. The objective of decision making is to gain a maximum and profitable result.

Explanation of Solution

Other considerations that would be crucial for final decision making of new product are:

Company W can identify and evidently state the problems.

Various other alternatives should be evaluated and for the same information should be collected.

Decisions are taken by organizations on the basis these procedures that are generally performed: break even analysis, decision tree, preference matrix and preference decision tree.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Textbook Question

Chapter A, Problem 1P

Mary Williams, owner of Williams Products, is evaluating whether to introduce a new product line. After thinking through the production process and the costs of raw materials and new equipment, Williams estimates the variable costs of each unit produced and sold at $6 and the fixed costs per year at $60,000.

If the selling price is set at $18 each, how many unit must be produced and sold for Williams to break even? Use both graphic and algebraic approaches to get your answer.
Williams forecasts sales of 10,000 units for the first year if the selling price is set at $14 each. What would be the total contribution to profits from this new product during the first year?
If the selling price is set at $12.50, Williams forecasts that first-year sales would increase to 15,000 units. Which pricing strategy ($14.00 or $12.50) would result in the greater total contribution to profits?
What oilier considerations would be crucial to the final decision about making and marketing the new product?

a.

Expert Solution

Summary Introduction

To calculate: The break even quantity using both graphic and algebraic approaches.

Concept Introduction: Break-even point is explained as a point where a company is earning no profits and incurring no losses reflecting that total cost is equivalent to total income.

Explanation of Solution

Given information:

Variable costs: $6 per unit

Fixed costs: $60,000

Selling price: $18 per unit

Break-even quantity: ?

Calculation of break even quantity:

Break even quantity(Q)=( Fixed costs Selling price−Variable costs)Q=$60,000$18−$6Q=5,000 units

Hence, the break even quantity is 5,000 units.

Graphic approach for calculating break even quantity:

Operations Management: Processes and Supply Chains, Student Value Edition Plus MyLab Operations Management with Pearson eText -- Access Card Package (12th Edition), Chapter A, Problem 1P

Fig (1)

b.

Expert Solution

Summary Introduction

To calculate: The total contribution to profits from this new product.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Explanation of Solution

Given information:

Forecasted sales: 10,000 units

Selling price: $14 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×10,000)−[$60,000+($6×10,000)]=$20,000

Therefore, the total contribution from the new product is $20,000.

c.

Expert Solution

Summary Introduction

To calculate: The total contribution to profits from this new product if selling price is $12.50.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Explanation of Solution

Given information:

Forecasted sales: 15,000 units

Selling price: $12.50 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($12.50×15,000)−[$60,000+($6×15,000)]=$37,500

Therefore, the total contribution from the new product is $37,500.

If selling price is $14 and forecasted sales are 15,000 units, then,

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×15,000)−[$60,000+($6×15,000)]=$60,000

It can be concluded that when selling price is $14 then it can get a greater total contribution to Company W.

d.

Expert Solution

Summary Introduction

To identify: The other considerations that would be crucial for final decision making for the new product.

Concept Introduction: Decision making is a process in which members of an organization select a particular course of action in response to both problem and opportunity. The objective of decision making is to gain a maximum and profitable result.

Explanation of Solution

Other considerations that would be crucial for final decision making of new product are:

Company W can identify and evidently state the problems.

Various other alternatives should be evaluated and for the same information should be collected.

Decisions are taken by organizations on the basis these procedures that are generally performed: break even analysis, decision tree, preference matrix and preference decision tree.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

a.

Expert Solution

Summary Introduction

To calculate: The break even quantity using both graphic and algebraic approaches.

Concept Introduction: Break-even point is explained as a point where a company is earning no profits and incurring no losses reflecting that total cost is equivalent to total income.

Explanation of Solution

Given information:

Variable costs: $6 per unit

Fixed costs: $60,000

Selling price: $18 per unit

Break-even quantity: ?

Calculation of break even quantity:

Break even quantity(Q)=( Fixed costs Selling price−Variable costs)Q=$60,000$18−$6Q=5,000 units

Hence, the break even quantity is 5,000 units.

Graphic approach for calculating break even quantity:

Operations Management: Processes and Supply Chains, Student Value Edition Plus MyLab Operations Management with Pearson eText -- Access Card Package (12th Edition), Chapter A, Problem 1P

Fig (1)

b.

Expert Solution

Summary Introduction

To calculate: The total contribution to profits from this new product.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Explanation of Solution

Given information:

Forecasted sales: 10,000 units

Selling price: $14 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×10,000)−[$60,000+($6×10,000)]=$20,000

Therefore, the total contribution from the new product is $20,000.

c.

Expert Solution

Summary Introduction

To calculate: The total contribution to profits from this new product if selling price is $12.50.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Explanation of Solution

Given information:

Forecasted sales: 15,000 units

Selling price: $12.50 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($12.50×15,000)−[$60,000+($6×15,000)]=$37,500

Therefore, the total contribution from the new product is $37,500.

If selling price is $14 and forecasted sales are 15,000 units, then,

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×15,000)−[$60,000+($6×15,000)]=$60,000

It can be concluded that when selling price is $14 then it can get a greater total contribution to Company W.

d.

Expert Solution

Summary Introduction

To identify: The other considerations that would be crucial for final decision making for the new product.

Concept Introduction: Decision making is a process in which members of an organization select a particular course of action in response to both problem and opportunity. The objective of decision making is to gain a maximum and profitable result.

Explanation of Solution

Other considerations that would be crucial for final decision making of new product are:

Company W can identify and evidently state the problems.

Various other alternatives should be evaluated and for the same information should be collected.

Decisions are taken by organizations on the basis these procedures that are generally performed: break even analysis, decision tree, preference matrix and preference decision tree.

Answer 8

a.

Expert Solution

Summary Introduction

To calculate: The break even quantity using both graphic and algebraic approaches.

Concept Introduction: Break-even point is explained as a point where a company is earning no profits and incurring no losses reflecting that total cost is equivalent to total income.

Explanation of Solution

Given information:

Variable costs: $6 per unit

Fixed costs: $60,000

Selling price: $18 per unit

Break-even quantity: ?

Calculation of break even quantity:

Break even quantity(Q)=( Fixed costs Selling price−Variable costs)Q=$60,000$18−$6Q=5,000 units

Hence, the break even quantity is 5,000 units.

Graphic approach for calculating break even quantity:

Operations Management: Processes and Supply Chains, Student Value Edition Plus MyLab Operations Management with Pearson eText -- Access Card Package (12th Edition), Chapter A, Problem 1P

Fig (1)

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

Summary Introduction

To calculate: The break even quantity using both graphic and algebraic approaches.

Concept Introduction: Break-even point is explained as a point where a company is earning no profits and incurring no losses reflecting that total cost is equivalent to total income.

Answer 13

Explanation of Solution

Given information:

Variable costs: $6 per unit

Fixed costs: $60,000

Selling price: $18 per unit

Break-even quantity: ?

Calculation of break even quantity:

Break even quantity(Q)=( Fixed costs Selling price−Variable costs)Q=$60,000$18−$6Q=5,000 units

Hence, the break even quantity is 5,000 units.

Graphic approach for calculating break even quantity:

Operations Management: Processes and Supply Chains, Student Value Edition Plus MyLab Operations Management with Pearson eText -- Access Card Package (12th Edition), Chapter A, Problem 1P

Fig (1)

Answer 14

b.

Expert Solution

Summary Introduction

To calculate: The total contribution to profits from this new product.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Explanation of Solution

Given information:

Forecasted sales: 10,000 units

Selling price: $14 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×10,000)−[$60,000+($6×10,000)]=$20,000

Therefore, the total contribution from the new product is $20,000.

Answer 15

b.

Expert Solution

Answer 16

b.

Expert Solution

Answer 17

Expert Solution

Answer 18

Summary Introduction

To calculate: The total contribution to profits from this new product.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Answer 19

Explanation of Solution

Given information:

Forecasted sales: 10,000 units

Selling price: $14 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×10,000)−[$60,000+($6×10,000)]=$20,000

Therefore, the total contribution from the new product is $20,000.

Answer 20

c.

Expert Solution

Summary Introduction

To calculate: The total contribution to profits from this new product if selling price is $12.50.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Explanation of Solution

Given information:

Forecasted sales: 15,000 units

Selling price: $12.50 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($12.50×15,000)−[$60,000+($6×15,000)]=$37,500

Therefore, the total contribution from the new product is $37,500.

If selling price is $14 and forecasted sales are 15,000 units, then,

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×15,000)−[$60,000+($6×15,000)]=$60,000

It can be concluded that when selling price is $14 then it can get a greater total contribution to Company W.

Answer 21

c.

Expert Solution

Answer 22

c.

Expert Solution

Answer 23

Expert Solution

Answer 24

Summary Introduction

To calculate: The total contribution to profits from this new product if selling price is $12.50.

Concept Introduction: Profit is explained as surplus of total income over total costs.

Answer 25

Explanation of Solution

Given information:

Forecasted sales: 15,000 units

Selling price: $12.50 per unit

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($12.50×15,000)−[$60,000+($6×15,000)]=$37,500

Therefore, the total contribution from the new product is $37,500.

If selling price is $14 and forecasted sales are 15,000 units, then,

Calculation of total contribution to the profits:

Total Contribution=Total revenue−Total cost={(Price×Quantity)−[Fixed costs+( variable costs×Quantity)]}=($14×15,000)−[$60,000+($6×15,000)]=$60,000

It can be concluded that when selling price is $14 then it can get a greater total contribution to Company W.

Answer 26

d.

Expert Solution

Summary Introduction

To identify: The other considerations that would be crucial for final decision making for the new product.

Concept Introduction: Decision making is a process in which members of an organization select a particular course of action in response to both problem and opportunity. The objective of decision making is to gain a maximum and profitable result.

Explanation of Solution

Other considerations that would be crucial for final decision making of new product are:

Company W can identify and evidently state the problems.

Various other alternatives should be evaluated and for the same information should be collected.

Decisions are taken by organizations on the basis these procedures that are generally performed: break even analysis, decision tree, preference matrix and preference decision tree.

Answer 27

d.

Expert Solution

Answer 28

d.

Expert Solution

Answer 29

Expert Solution

Answer 30

Summary Introduction

To identify: The other considerations that would be crucial for final decision making for the new product.

Concept Introduction: Decision making is a process in which members of an organization select a particular course of action in response to both problem and opportunity. The objective of decision making is to gain a maximum and profitable result.

Answer 31

Explanation of Solution

Other considerations that would be crucial for final decision making of new product are:

Company W can identify and evidently state the problems.

Various other alternatives should be evaluated and for the same information should be collected.

Decisions are taken by organizations on the basis these procedures that are generally performed: break even analysis, decision tree, preference matrix and preference decision tree.