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- Title
ADVANTAGES AND LIMITATIONS OF LINEAR AND NONLINEAR BREAK-EVEN MODELS.
- Authors
Martinovic, Danijela
- Abstract
The break-even point model is a well-known instrument for determining target production, income and costs for the purpose of gaining a zero profit. Although it is a concept that was present in the literature as early as in the late XIX century, the break-even point is applied in the contemporary business practice even today. This paper aims to demonstrate the advantages and limitations of the traditional (linear) and contemporary (nonlinear) break-even models. Particular attention is paid to the assumptions needed for a successful application of both models. The frequency of the use of the break-even point, limitations and assumptions were studied on a sample of 100 manufacturing enterprises in Bosnia and Herzegovina. The research study has revealed management's awareness of the potentials for applying the break-even point concept and the need to use the modern models that include assumptions pertaining to change in the key variables in the model. This results in the need to design such nonlinear, dynamic and stochastic models that best represent the dynamic conditions of contemporary business.
- Subjects
BOSNIA &; Herzegovina; BREAK-even analysis; BUSINESS conditions; STOCHASTIC models; DYNAMIC models
- Publication
Economic Horizons / Ekonomski Horizonti, 2019, Vol 21, Issue 3, p221
- ISSN
1450-863X
- Publication type
Article
- DOI
10.5937/ekonhor1903229M