Utility of break even point in managerial decision making, Cost Accounting

UTILITY OF BREAK EVEN POINT IN MANAGERIAL DECISION MAKING

1. It assists in determination of sales mix

2. It assists in exploring new markets

3. It assists in deciding about discontinuance of a product line

4. It assists in taking make or buy decisions

5. It assists in taking equipment replacement decisions

6. It helps in investment of assets

7.It  helps in decision making relating to change Vs status quo - which may consist of situations such as -

i)  adoption of new method of operation

ii)  over- time Vs second shift or

iii)  Sale Vs further processing etc

8. It assists in making decisions as to expand or contract

9. It assists in decisions relating to shut down or continue operating

Break even chart:  The break even chart is a graphical means of finding out the breakeven point.  It is a graph with output or sales on the X -axis and costs (fixed, variable and total) plotted on the Y - axis.  At which point the total sales line intercepts the total cost line from below is known as breakeven point. At this point, total cost is similar to total revenue. Further than this point lies the profit zone and below this point lies the loss zone.

Illustrations

1.  From the following particulars, calculate the break even point

Variable cost per unit = Rs.12

Fixed expenses = Rs.60,000

Selling price per unit = Rs.18

Solution:

BEP (Units) =             Fixed cost

                         Contribution per unit

(Selling Price - Variable Cost = Contribution)

Rs.18 - Rs.12 = 6)

Posted Date: 10/15/2012 7:10:40 AM | Location : United States







Related Discussions:- Utility of break even point in managerial decision making, Assignment Help, Ask Question on Utility of break even point in managerial decision making, Get Answer, Expert's Help, Utility of break even point in managerial decision making Discussions

Write discussion on Utility of break even point in managerial decision making
Your posts are moderated
Related Questions
Methods of Labour Remuneration There Labour remuneration methods can be broadly classified into two factors as: i. Time rate or on the basis of the time spend in the factor

i want some informations about elements of manufacturing cost

are exploration costs of a mining company an asset or an expense


explain one operation: unit or output cost

how to determine reasonable, allowable, allocable, variable, fixed cost of new company

Direct Materials Total Variance Direct materials total variances refer to the difference between the standard direct material cost of the actual production volume and the actu

what are the material management questions

Are public service corporations subject to uniform capitalization rules?

formula for calculting WACC