Skip to main content

Unit II - Break-Even Analysis


Concept of Break-Even Analysis:

Break-Even Analysis is a concept used very widely in production management and cost. It is an analytical tool which helps the firm to identify that level of sale where it will cover its cost of production. Any sale over and above the break- Even Point will accrue profits to the firm, while any sales less than it would put the firm into losses. The Break-Even Point shows the price at which the firm makes neither profit nor loss. Break-Even point is a very significant concept in Economics and business, especially in Cost Accounting. Break-Even point is a point where the cost of production and the revenue from sales are exactly equal to each other; which means that the firm has neither made profits nor has incurred any losses. The Break-Even Analysis is also known as the Cost- Volume- Profit Analysis and is used to study the relationship between total cost, total revenue, profits and losses. It also helps to determine that level of output which is required to cover the operating costs of a business.

Limitations of Break-Even Analysis:

For the break- even point to be counted, all costs need to be clearly categorized in fixed and variable costs, which may not be possible every time.
For the multiple- product or joint- product operations, it is difficult to apply the break-even analysis. on needs to ascertain the costs to each product, hence the analysis is applicable only for a single product.
The computation of the break-even point is based on the historical information. If this information is not relevant, the analysis cannot be applied usefully.

Significance of Break-Even Analysis:

The break-even analysis helps us to determine the levels of sales necessary to meet all the operating costs. With the estimates of revenue and costs, we can forecast the profits. One can also appraise the effects of change in price, fixed costs and variable cost on sales volume, total cost and total revenue and in turn, on the break-even point. One can compare the profit earning capacities of different firms. It can also bring out the significance of capacity utilization for achieving economy.

Video Lecture Links:


https://youtu.be/EMVs0IL0EfU
 

  
Contents   1   2   3   4   5

Labels:

Comments

Post a Comment

Popular posts from this blog

Unit II

2.1 What Are Web Directories? Web Directories  are also known as link directories which are very much concerned with the website’s listings in their index. In olden days, I mean in the past decade, web directories had a great value in the sense of search engines. Because whenever people type queries in search engines, these search engines often consult with the web directories for updated information. All Directories sites follow a layered approach while listing the website i.e, the first one is the main category then followed by the subcategory and then another subcategory until there came a suitable one. Various Features of Web Directories Listing There are various features while listing the websites which depends on the price and duration. These features include: Free submission  – these are free and nothing is charged for review and listing of the submitted links while it takes at least 3 to 6 months while getting listed Reciprocal link  – th...
Post a Comment
Read more

Unit I

A web browser, or simply "browser," is an  application  used to access and view  websites . Common web browsers include Microsoft Internet Explorer, Google Chrome, Mozilla Firefox, and Apple Safari. The primary function of a web browser is to render  HTML , the code used to design or "mark up"  webpages . Each time a the browser loads a web page, it processes the HTML, which may include text,  links , and references to images and other items, such as  cascading style sheets  and  JavaScript  functions. The browser processes these items then renders them in the browser window. 1.1 Web Browsing: History of web Browsers, Basic Functions of Web Browser, and Types of Web Browsers Within the realm of computing, web browsing history is the list of  web pages  a user has visited recently, as well as associated data such as page title and time of visit, which is recorded by  web browser  software as standard fo...
Post a Comment
Read more

Interview Notes / Questions - US Taxation 1065 & 1120

  1.     163 J: Business Interest Expense limitation: Example: Capital Structure: Debt - 98% Equity - 2% 8890 Fedra Form Why IRS limiting a corporation? Corporation highly leverage on debt so they pay high interest expense to claim deductions.   2.     Sec 78 Gross up: If parent paid taxes of it's foreign subsidiaries, then the parent Can Claim that tax in us and can pay less tax Ex. 100$ (CFC) earn & paid 10$ tax & in Us parent must 21% 21$ pay can deduct 10$, must pay only 11$. line 30 state 50% deduction line 28 State 100% deduction   $210 $ 10 = $ 11 3.     Sub part F: If Sub part f is an income which is relatively movable from one taxing jurisdiction to another and that is Subject to low rates of foreign tax - This applies to CFC only.   4.     DRD: Dividend Received Deduction It is a tax deduction available to corporations in the US that receive dividen...
Post a Comment
Read more