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
7. The Isabelle Corporation rents prom dresses in its stores across the southern United States. It has just issued a five-year, zero-coupon corporate bond at a price of $74. You ha

You are thinking of investing in one of two corporations, both in the same industry, the XYZ Corporation or the ABC Corporation. Selected data follows: Sales data for the year e

Developing and Insight into Labour and Material Variance The calculation of labour and material variances is not sufficient; we require knowing how the variance could have typ

Two firms compete in a homogenous product market where the inverse demand function is P = 10 - 2Q (quantity is measured in millions). Firm 1 has been in business for 1 year, while

the features and scopes of job costing

In a given period production and cost data were as follows:     Total Costs   Materials   Rs. 5,115                      Labour          3,952                     Overheads

OBJECTIVES OF COST ACCOUNTING 1)To help in the development of long range plans by provided that cost data that acts as a origin for projecting data for planning. 2)To make s

Tyler's Consulting Company has purchased a new $15,000 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those a


#purchase price R45 order costs R175 lead time 6 days cost of capital (after taxation) 20% direct inventory holding costs R25 annual demand 8500 units business operational 330day p