How can we draw a break even chart, Managerial Accounting

Assignment Help:

How can we draw a break even chart

Under this method the variable cost line is drawn first and then fixed cost line is drawn over and parallel to the variable cost line. The fixed cost line ,so drawn represents the total cost (variable + fixed) at various level of output because it is drawn above the variable cost line this method is useful to the management for decision making because it reveals additional information :

( there is graaf p no c-85)

a) The variable costs are shown directly for various levels of output/sales.

b) Marginal contribution at various levels of sales is indicated clearly by the difference between sales line and variable cost line.

c) It shows the recovery of fixed cost at various levels of production.

A small variation of this of this method is that of showing the various elements of fixed and variable factory overhead cost variable cost for example major cost elements such as direct material cost variable factory overhead cost variable selling overhead and costs.

(there is graaf p no c-86)

This is  a method form of a simple break even chart as shown in the first two methods above. Under this method total cost line is not drawn father another line called contribution line is drawn from the origin and this line goes up with the increase in the level of output. The fixed cost line is drawn parallel to the x- axis as in the first method. The sales line is also drawn as usual. in this method the question of intersection of sales line with the total cost line dose not arise because there is no cost line . the break even point is that point where the contribution line crosses the fixed cost line. at this  point total contribution is equal to the total fixed cost line dose not arise because there is no cost line. The break even point is that point where contribution line crosses the fixed cost line. The break even point is that point where the contribution arise crosses the fixed cost line. At the contribution is equal to the fixed and hence there is no profit or loss. As the point total contribution increases more than the fixed cost profit shall arise to the organization and as contribution break even chart shows clearly contribution at different levels of activity and indicates that all levels below the break even point are unable to cover the fixed costs.

 


Related Discussions:- How can we draw a break even chart

Post Cost, What is the correct formula for Post Cost?

What is the correct formula for Post Cost?

Stock-out costs, Stock-out costs These are the opportunity costs of run...

Stock-out costs These are the opportunity costs of running out of stock. They comprise: 1) The costs of lost customer sales, and therefore lost contribution to fixed costs.

Payback period, if equipment will be depreciated on a straight-line depreci...

if equipment will be depreciated on a straight-line depreciation basis over a five year period with an estimated residual value, what do I do with this information in a investment

#title.standard cost and variances., Direct materials,4yard at$3.50per yard...

Direct materials,4yard at$3.50per yard...$14.00 Direct labor,1.5direct labor hours at $12.00 per direct labor hour....$18 Variableoverhead,1.5 direct labour hours at $2.00 per dire

Extra cost decision, Discuss arguably how management accountants should dec...

Discuss arguably how management accountants should decide when are faced with the extra shift decision

Moore company uses process costing, Moore Company uses process costing.  Th...

Moore Company uses process costing.  The following information was available for October: During October, 1,000 units were started, and costs incurred during the month were

What is management accounting, Question 1 The following items are found in...

Question 1 The following items are found in the trial balance of M/s Sharada Enterprise on 31st December, 2000. Sundry Debtors

Bussiness.., #queThe following information pertains to Fairways Driving Ran...

#queThe following information pertains to Fairways Driving Range, Inc.: The company is considering operating a new driving range facility in Sanford, FL. In order to do so, they

Quadratic loss function, Consider the following quality data for three diff...

Consider the following quality data for three different manufacturers of automobile weather-strips: Weather-strip Bulb Dimension Specification y=20 +or- 4mm

Algebraic analysis, ALGEBRAIC ANALYSIS The supposition of linear cost b...

ALGEBRAIC ANALYSIS The supposition of linear cost behavior allows use of straight-line graphs and simple linear algebra in cost-volume study. The net cost is a semi-variable c

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd