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 - INCORPORATION OF COMPANY

2.1 Incorporation of Company The incorporation of a company refers to the legal process that is used to form a corporate entity or a company. An incorporated company is a separate legal entity on its own, recognized by the law. These corporations can be identified with terms like ‘Inc’ or ‘Limited’ in their names. It becomes a corporate legal entity completely separate from its owners. Steps in Incorporation of a Company A group of seven or more people can come together so as to form a  public company  whereas, only two are needed to form a private company. The following steps are involved in the incorporation of a company. 1. Ascertaining Availability of Name The first step in the incorporation of any company is to choose an appropriate name. A company is identified through the name it registers. The name of the company is stated in the memorandum of association of the company. The company’s name must end with ‘Limited’ if it’s a  public compa...
Post a Comment
Read more

Section 9 - Employability skills

Important employability skills Communication skills - these are the skills required to transmit or receive messages accurately to and from other people by speaking or in writing, without misunderstandings. These skills include: Verbal Communication – or the words that we use, whether face-to-face or in writing. The balance between face-to-face and in writing is likely to vary in different jobs, but few, if any, will not want at least some of each type of communication; Non-Verbal Communication –   or what we communicate without words, for example through body language, tone of voice, or even emojis; and Listening – how we take in and then interpret the verbal and non-verbal messages sent by others, including in writing. Emotional intelligence – or the ability to recognise, understand and manage your own and others’ emotions, and use them positively to achieve the desired outcomes. Team-working – the ability to work with others in groups and teams, ...
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