Please provide detail explanation on Various decisionmaking

Please provide detail explanation on Various decision-making models, such as cost-volume-profit and the theory of constraints

Solution

The Cost-Volume-Profit or CVP analysis assumes that there is a constant amount of fixed cost with unit variable cost and selling prices.

By plotting the CVP curve, we can find the break even point i.e. at the point where the amount of sales is equal to the amount of invest also known as zero profit point

The CVP curves helps in analyzing that the increase in volume of production will increase the profit or not and then find the optimum point to increase the profit function

The theory of constraint model basically deals with the three things

Step 1: Find the weakest chain or the weakest link i.e. identify the constraint which is creating a reduction in profit or reduction in sales of the product

Step 2: The next step is to cut the cost in that weak chain by applying some strategies or using some other material without compromising with the quality and the brand

Step 3: After managing the constraint, if the performance has not been achieved upto the desired level, redo the constraints and start afresh