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TABLE OF CONTENTS

CHAPTER TITLE PAGE NO.

1 INTRODUCTION 2

INDUSTRIAL PROFILE&COMPANY 6
2 PROFILE
RESERCH METHODOLOGY 9
3
DATA ANALIYSIS&INTERPRETATION 16
4
SUGGESTIONS&SUMMARY 18
5
BIBLOGRAPHY 21
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CHAPTER-1
INTRODUCTION
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INTRODUCTION
The Break- even point (BEP) in economics.is the point at which
total cost and total revenue are equal .there is no net loss or
gain and one has broken even through opportunity cost have
been paid and capital has received the risk adjusted expected
return .in short all cost that must be paid are paid and there is
neither profit or loss .the main purpose of break-even point is
to determine the minimum output that must be exceeded for a
business to profit .it also is a rough indicator of the earnings
impact of a marketing activity
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DEFINITION
According to Charles T Homages,” thebreak-even point of
activity sales volume is where total revenue and total expenses
are equal .it is the point of zero profit &zero loss
According to Metz, Curry and Frank, “a break-even analysis
indicates at what level, cost and revenue are in equilibrium.”
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SIGNIFICANCE OF BREAK-EVEN ANALYSIS

1. Break- Even point is a point where the cost of production and
the revenue from sales are exactly equal to each other.
2. The firm has neither made profits nor has incurred any
losses.
3. Break- Even analysis is a concept used very widely in the
production management and costing.
4. An increase in price will prepone the break- even point while
a fall in price postpones it.
5. An increase in the fixed cost increases the break- even point
while a fall in the fixed cost will reduce the break- even point.
6. An increase in the variable cost per unit increases the break-
even point while a fall in the variable cost will reduce the break-
even point.
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CHAPTER 2

INDUSTRIAL PROFILE
&
COMPANY PROFILE
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INDUSTRIAL PROFILE
The textile industry is one of the largest world with a massive raw material and
textile manufacturing base. Our economy is largely dependent on the textiles
Manufacturing and trade in addition to other major industries. about 27% of the
foreign exchange earing are on account of export of export of textile and clothing
alone. the textile and clothing sectorcontributors about 14% to then industrial
production and 3 % to the gross domestic product of the country. Around 8 % of
the total excise revenue collection is contributed by the textile industry. So much
so, the textiles industry account for as large as 21 % of the total employment
generated in the economy. Around 35 million people are directly employed in the
textile manufacturing activities indirect employment including the man power
engaged in agricultural based raw-material production like cotton and related
trade and handing could be stated to be around another 60 million

The Kerala textile industry ranks second among the

traditional industries of the state in them of providing employment. spinning is
the largest sector in the textiles industry in Kerala. there are 17500 weavers in
Kerala, including the co-operative and private sector. The handloom industry of
Thiruvananthapuram and Kannur and in some parts of Kozhikode, Palakkad,
Trissur, Ernakulum,Kollam, Kasaragod and employees about 100000 people.Kerala
has 58400 handlooms and 5500 pow looms. Around 94% of the total numbers of
looms are under the cooperative sector, the rest being under industrial
entrepreneurs. The overall production of handloom cloth by handloom industry
of Kerala was 25.55 million meters in 2010-2011,valued at US$ 40. OO million

COMPANY PROFILE
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LAMIYA SILKS, EDAPPAL

The first textiles showroom of lamiya silks was started in 1986 at moonnupeedika,
Trissur district,Kerala. They are doing textiles business for last 25 years. they are
dealing with the trading of readymadegarments, textiles and cosmetics items.
Their showroom with 1500 to 2000 square feet space each, which are located at
various district of Kerala state. Their main motto is supplying quality and branded
items with lowest price according to the satisfaction of their customers. They
have 9 large retailer’s textiles showroom in Kerala. Those are situated in
palarivattam, monnupeedika Calicut thripayar, Thrissur, tirur and Malappuram.

One of the branches of lamiya silks in edappal was established on 9th AUG 2005. it
was inaugurated by Malayalam actress meera Jasmin. there are more than
50 employees working in this shop. Most of their customers are from
Malappuram, Thrissur, Ernakulum, Calicut and Palakkad district of Kerala states.
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CHAPTER 3

RESEARCH METHODOLOGY
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RESEARCH
Research means a search for facts- answers to questions and solutions
to problems. I t is a purposive investigation. A research can be defined
as a scientific and systematic search for pertinent information on
specified topic.

RESEARCH METHODOLOGY
This study is conducted by conducting a personal interview with the
office manager.

OBJECTIVES OF THE STUDY

 To find out the break-even point.
 To find out the business strength and profit earn in capacity.
• To ascertain the selling price which will give the desired profit.
• To find out the Margin of safety of the company.

SOURCE OF DATA COLLECTION

Primary data collected through personal interview

Statistical tools used

Statistical tools used in this project is chart
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CHAPTER 4
DATA
ANALISIS&INTERPRATATION
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BREAK EVEN ANALYSIS

However, financial information is the key to understanding the
business's profitability, and knowing the numbers is essential for
learning about your company and planning for the future. Conducting a
breakeven analysis is a critical step for every business to determine
what sales volume is necessary to cover costs.

FACTORS INFLUENCING BREAK EVEN POINT

1. Changes in Price
Changes in price affect the total revenue from sales and hence the
break- even point. An increase in price will prepone the break- even
point while a fall in price postpones it.

2. Changes in fixed cost

An increase in the fixed cost increases the break- even point while a
fall in the fixed cost will reduce the break- even point.

3. Changes in variable cost per unit

An increase in the variable cost per unit increases the break- even
point while a fall in the variable cost will reduce the break- even
point.
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Limitations of Break- Even Analysis

1. For the break- even point to be counted, all costs need to be clearly
categorized in fixed and variable costs, which may not be possible every
time.
2. For the multiple- product or joint- product operations, it is difficult
to apply the break- even analysis. on needs to ascertain the costs to
each product> hence the analysis is applicable only for single product.
3. The computation of break- even point is based on the historical
information. If this information is not relevant, the analysis cannot be
applied usefully.
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CALCULATION OF BREAK – EVEN POINT

Break-even point = Fixed Costs

Contribution per unit

Contribution = Selling price– variable cost

? fixed cost =400000

Variable cost = 500
Selling price =15000

BREAK EVEN POINT

= TOTAL FIXED COST

1-VARIABLE COST/ PRICE

= 400000
1-500/15000
= 4137916rupees
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INTERPRETATION
Thus the break-even point of this firm is when it sales for Rs.
4137916This is the point where the total cost equals total revenue.
When the sales reaches 4137916, the total cost incurred equals the
total revenue earned, there is neither profit nor loss. Any amount of
sales higher than the breakeven sales is profitable to the firm whereas
any amount of sales lesser than the break-even sales is a loss.
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Explanation of the graph: -

 The number of units have been presented in the X- axis

whereas cost and revenue presented on Y- axis.
 Total revenue (TR) curve is shown as linear, as it is assumed
that the price is constant, irrespective of the output.
 TC curve is a straight line originating from the vertical axis
because total cost comprises constant / fixed cost plus variable
cost which rise linearly.
 In the figure, В is the break-even point at OQ level of output.
 The total revenue line and total cost line crosses each other.
This is the BREAK EVEN POINT. The total cost line is above the
total revenue before intersection and below after the point of
intersection
 It tells us that the business suffers a loss before the point of
intersection and makes a profit after this point.
 The difference between the total cost line and the total
revenue line before the point of intersection (BE point) is the
LOSS area.
 The difference between the total cost and the total revenue
line after the point of intersection (BE point) is the PROFIT
area.
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MARGIN OF SAFETY

Margin of safety represents the strength of the business. It

enables a business to know what is the exact amount it has
gained or lost and whether they are over or below the break-
even point. In break-even analysis, margin of safety is the
extent by which actual or projected sales exceed the break-
even sales. It may be calculated simply as the difference
between actual or projected sales and the break-even sales.
However, it is best to calculate margin of safety in the form of
a ratio.

Importance of Margin of Safety

The soundness of a business may be gauged by the size of the

margin of safety. A high margin of safety indicates the
soundness of business i.e., the break-even point is much below
the actual sales so that even if there is a fall in sales, there will
still be a profit. A small margin, on the other hand, indicates a
not-too-sound position. If a low margin of safety is
accompanied by high fixed cost and high contribution margin
ratio, action is called for reducing the fixed cost or increasing
sales volume. But if the margin of safety as well as the
contribution ratio are low (the fixed cost being reasonable) the
situation requires that efforts should be made towards
reducing the variable cost, or an increase in the selling price
should be effected. Margin of safety is also of immense use in
making inter-firm comparisons.
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CHAPTER 5
SUGGESTIONS
&
SUMMARY
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SUGGESTIONS
Reduce fixed costs. Even if the firm end up paying a higher per-unit
price by outsourcing a fixed cost, you may still be better off. With
variable costs you only pay for what you use, so you have profitability
protection if your sales lag.
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CONCLUSION

Altogether in a nutshell, break even analysis is useful as a first

step in developing financial applications, which can be used in
invoicing and budgeting. The main purpose of this analysis is to
have some idea of how much to sell, before a profit will be
made. Break even analysis is extremely important before
starting a new business (or launching a new product) because
it give answers to crucial questions such as “How sensitive is
the profit of the business to decreases in sales or increase in
cost”. This analysis can also be extended to early stage
business in order to determine how accurate the first
predictions were and monitor whether the firm is on the right
path (the one that leads to profit) or not. Even mature
business should take into consideration their current B.E.P and
find ways to lower that benchmark in order to increase profits.
Having the right price for a product or service can boost profit
much faster than increasing volume. Setting a price is, of
course, complicated but breakeven analysis can help
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CHAPTER 6
BIBLIOGRAPHY
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BIBLIOGRAPHY

 www.google.com
 www.investopedia.com
 https://en.wikipedia.org/wiki/Break_even_analysis
 www.accountingformanagement.org/margin-of-safety-
mos-calculator
