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Break Even Analysis. The analysis of cost behaviour is necessary for planning, control and decision making. Analysis of cost behaviour means analysis of variability of each cost element in relation to the level of output. Every cost follows some definite behaviour pattern.
A Break-Even Analysis also known as cost volume & profit analysis or profit contribution analysis is an important profit planning technique that illustrates at what level of output in the short run, the
apply the break even analysis with a view to determine the level of sales needed to be achieved to avoid losses; determine sales level required to earn a target profit;
business moves from loss to profit position is termed as break-even analysis. Break even analysis is a tool which finds the point, either in monetary terms or in terms of number of units, at which total costs equal revenues. The point is called break even point. Break even analysis requires a knowledge of fixed costs, variable costs and revenue.
Break-even analysis is useful in studying the relation between the variable cost, fixed cost and revenue. Generally, a company with low fixed costs will have a low break-even point of sale.
BREAK-EVEN ANALYSIS. SALES REVENUE/TURNOVER. Revenue is the money a business makes from sales. The total amount of money a business receives from its sales is called total revenue. Total revenue = quantity sold x selling price. TYPES OF COSTS. Fixed Costs: Do not vary with output. Fixed costs only change in the long run.
Understand what is meant by BREAI(-EVEN. ANAL1/SIS. Define the term BREAI(-EVEN POINT. Define the term lJNIT CONTRIBUTION. Calculate the break-even point. Draw a BREAI(-EVEN CHART and show the break even point. Use a break-even chart to compare alternative stra tegies. Appredate the limitations of break-even analysis.
Breakeven Analysis: The Definitive Guide to Cost-Volume-Profit Analysis - Free download as PDF File (.pdf) or read online for free. This book is a comprehensive collection of cost-volume-profit applications.
Chapter 9. Break-Even Analysis. Babita Goyal. Key words: Profit planning, variable cost, fixed cost, VCP analysis, BEP point, contribution, margin of safety, P/V ratio, and marginal analysis. Suggested readings: . Chandra P. (1970), Appraisal Implementation, Tata-McGraw Hill Publishing Company. Limited, New Delhi.
Break Even Point Analysis. The break-even point is the point at which total revenue is equal to total cost. At this point, the profit is zero. (A particular company neither makes nor loses money at this point). There are two types of costs to consider: variable and fixed.
