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PRESENTED BY: Aditya Agarwal Dhingra Mohit Nischinth Bharadwaj Sindhu Chandra Shweta Madaan K.Vyshali
NON-LINEAR CHART
ALGEBRAIC METHOD
TR=(P)(Q) TC=TFC+TVC TC=TFC+AVC(Q) At break even, TR=TC
QB= TFC/(P-AVC) Where QB=break-even quantity TFC= total fixed cost P=price AVC= average variable cost
Problem
A Company has fixed costs of $3000 this period. Direct labor is $3.25 per unit, and material is $ 1.75 per unit. The selling price is $ 12.50 per unit. Break-even point in dollars and in units(?) Fixed Cost=$3000 Variable Cost=$5.00(3.25+1.75) No of Units=50 Unit Price=$12.50
Breakeven Analysis
$12,000
COST-VOLUME-PROFIT
$10,000
$8,000
$6,000
$4,000
$2,000
$0
0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800
USES
Helps in determining the optimal level of output. Determines the minimum cost for the given level of output. Make or buy decisions. Helps in plant expansion/contraction decisions. Finding the selling price which would prove most profitable to the firm.
MANAGERIAL USES
Safety Margin Decisions Safety margin=[(sales-BEP)/sales]*100 Target Profit
Technique of forecasting
LIMITATIONS
Adjustments in factor prices Unrealistic assumptions Static Applicable only for proper managerial accounting techniques Selling costs
CONCLUSION
It is simple, easily understandable and quite inexpensive. Focuses attention on fundamental relationships. Can be used for various purposes. Suitable to those industries which are not subject to fast change in technology and input prices.
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