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

Assignment Help:

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)

#### Identify the stakeholders and organization, i.   Identify the organization ...

i.   Identify the organization ii.  Identify the stakeholders iii. Give the major requirements for the IT application iv. Reflect on how difficult it was to do the require

#### Internal sources of funds, While we are looking for sources funds it is oth...

While we are looking for sources funds it is other than natural to start searching from home. What do we have? During examining the requirement for working capital we could also ma

#### Calculate the re-negotiate the part-time trainers cost, a.    If you could ...

a.    If you could pick a single source of cash for your business, what would it be? Why? b.    How can a business earn large profits but have a small balance in Retained Earnin

#### First in first out or fifo method - work in progress, First In First Out or...

First In First Out or FIFO Method - Work in Progress This method considers merely those costs incurred throughout the recent period.  Equivalent units are calculated given a

#### Absorption costing, features of absorption costing

features of absorption costing

#### Prepare a statement to show the total overheads, QUESTION 1: PART A ...

QUESTION 1: PART A Swatathon Inc. has two production departments (A and B) and two service departments (maintenance and stores). Details of next year's budgeted overheads

#### Find the high future rates of return, Assume your grandparents have just gi...

Assume your grandparents have just given you \$20,000 on the condition that you invest the money in the stock market. As you contemplate making your investment choices, what accoun

#### Calculate the payback period and the accounting rate, Freshly Ground Invest...

Freshly Ground Investments have just made an investment of \$550 000 in a new Toyota Hilux (with trailer) delivery vehicle. This vehicle will be used for deliveries and generate rev

#### Calculate the bad debt estimation, Q. 1. The 31st December 2009 trial balan...

Q. 1. The 31st December 2009 trial balance of Anika Co. reported the following information. Dr. Cr. Allowance for Bad Debts........................... \$1,300 During the year 201

#### Estimate the selling price and profit, Slash and Burn is a monopolist that ...

Slash and Burn is a monopolist that can sell its output at these prices and with these total costs:                    Output             Price        Total Cost