A breakeven analysis can be computed to give managers an idea of how much product or service needs to be sold so the company can recoup operating costs and generate a profit. Although the calculation is simple in nature, determining the variable and fixed costs required to obtain the breakeven result takes careful analysis, in addition to accurately determining sales volume. Such costs like administrative, rent and insurance are among the expenses that are included in the equation. Once the breakeven analysis is completed, then managers can determine the organization’s margin of safety. The margin of safety allows management to know the amount revenues can drop and still be above the break-even point. When management accurately calculates the breakeven analysis, their organization is more likely to achieve greater profits (Reilly, 2009, p. 29).

Inventory management is a vital tool managers must use to ensure adequate levels are maintained. Maintaining too much inventory, imprecise inventory tracking systems and a lack of priorities have the ability to disturb operations and lower profit margins. Just-in-time inventory management, part of Lean Production, and related calculations help managers keep stocking and reordering costs to a minimal level. As a result, the business can sustain or improve profit margins. Other inventory management methods also help reduce costs and maintain adequate inventory turnover times.  By utilizing such techniques, inventory levels are kept at sufficient levels to meet consumer demand and inventory turnover is rapid; thus, resulting in a reduction in operations budgets being tied up in inventory sitting on a shelf not being sold.  JIT inventory is a popular strategy a company can utilize to increase efficiency and decrease waste by purchasing supplies only when they are needed in the production process, thus reducing overall inventory costs.  A negative aspect to this technique is that it requires manufacturers to be able to accurately predict inventory demand (“Just In Time (JIT) Definition | Investopedia,” n.d.).

Third, budgeting is an important tool used in both profe