Extending Cost-Volume Breakeven Analysis to Include Flexibility

Recently many manufacturers have emphasized the enhancement of customer service through increased manufacturing flexibility. Sophisticated models exist for the justification of modern automation technologies which could have an impact on manufacturing flexibility, but practitioners are more likely to utilize a simple tool such as cost-volume breakeven analysis. Indeed, much of the difficulty that managers have in justifying modern automation technologies may be due to the shortsightedness of cost-volume breakeven analysis. In this paper, we introduce an equally simple justification tool, cost-volume-flexibility breakeven analysis, and explain its use and the benefits accompanying its use.