BREAK-EVEN ANALYSIS

Presented By Shabnam Arah

The behaviour of cost in relation to volume

Volume of production or sales, where the business will break-even

Sensitivity of profit due to variation in output

Amount of profit for a projected sale volume Quantity of production and sales for a target of profit level

This information helps manager to take managerial decision and management control .

Prices will remain fixed

Variable cost rate will remain fixed Total fixed costs will remain fixed up to maximum

manufacturing capacity of the firm

Quantity of units produced = quantity of unit sold, so there is no change in inventory.

All units produced are sold

Changes in activity are the only factors that affect costs.

Difficulties in the classification of Fixed and Variable Costs Ratio of Fixed and Variable Expenses Selling Price Factor affecting Production costs

No Attention on Capital Employed

Margin of Safety in Units = Actual sales in Unit B.E.P. Sales in Unit Margin of Safety = (Profit / (P/V ratio)) * 100