Operations management

Table of Contents

1. Topic pack - Operations management - introduction
2. Operations Management (OM) - Introduction
3. 5.1 Production methods notes
4. 5.1 Production methods - questions
5. 5.2 Costs and revenues - notes
6. 5.2 Costs and revenues - questions
7. 5.3 Break-even analysis - notes
   1. Break-even analysis
   2. Amazon.com
   3. Break-even analysis - calculation
   4. Building a break-even chart
   5. Drawing a break-even diagram
   6. Completing a break-even chart
   7. Margin of safety
   8. Margin of safety - example
   9. Break-Even: Worked example
   10. Changes in break even
   11. Target Profit and Revenue
   12. Examples - break-even analysis (1)
   13. Examples - break-even analysis (2)
   14. Limitations of break-even analysis
8. 5.3 Break-even analysis - questions
9. 5.3 Break-even analysis - simulations and activities
10. 5.4 Quality assurance - notes
11. 5.4 Quality assurance - questions and activities
12. 5.5 Location - notes
13. Innovation - notes (HL only)
14. 5.6 Innovation - questions
15. 5.7 Production planning - notes
16. 5.7 Production planning - questions
17. 5.8 Project management - notes (HL only)
18. 5.8 Project management - questions (HL only)
19. Print View

Margin of safety - example

This is usually expressed as a quantity, and you should always do this. However, it is better, as well, to put the margin of safety in context by expressing it as a percentage of the break-even quantity. Numbers alone can be misleading.

Example - margin of safety

Two competing companies in the MP3 market have the following break-even information about their production facilities and levels

The larger margin of safety in absolute terms represents a smaller relative quantity. 3tec will go into a loss position faster than Zensa.