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

Phrose 1 - The Town Week - by E.V. Lucas (Sem IV)

In his celebrated essay, “The Town Week” E. V. Lucas very artistically painted various moods and attitudes of the urban people in the seven days of a week. On Monday, people wake up from their dreamy and lazy languor. The day seems flat as if without any colour and flavour. The fun and relic of the Saturday and Sunday have gone. They look morose and pale. A dull and monotonous life is going to eat them up once again. Reluctantly, people come back to their workplaces from their village home. The town becomes populated and busy. The local trains are over-crowded. They do not put their interest in their work. So, most of the time, they enjoy gossiping with their colleagues about their week-end spending. The laziness of Monday almost dries up on Tuesday. People become more active and exciting like “glittering star”. They take their job more seriously. The day is pretty good for the businessmen. The week looks more stirring and energetic on Wednesday. It is th...
Post a Comment
Read more

Unit IV

4.1 Google Drive  Google Drive is a free cloud-based storage service that enables users to store and access files online. The service syncs stored documents, photos and more across all of the user's devices, including mobile devices, tablets and PCs. Google Drive integrates with the company's other services and systems -- including Google Docs, Gmail, Android,  Chrome , YouTube,  Google Analytics  and Google+. Google Drive competes with Microsoft OneDrive, Apple iCloud, Box, Dropbox and SugarSync. Features Of Google Drive Your stuff, your way – Drive Features. 15 GB space. Keep any file. Share how you want. ... Built to work with Google. Save Gmail attachments. Powerful search. Google Photos. ... Work smarter with apps. Docs, Sheets, Slides. Google Forms. ... Take Drive even further. Scan documents. Work offline. Uses Of Google Drive:  1. Backup Your Precious Files Do you have photos of a family vacation that mean t...
Post a Comment
Read more