break-even analysis

Topics: Variable cost, Costs, Contribution margin Pages: 21 (5168 words) Published: September 20, 2013


BREAK-EVEN POINT ANALYSIS

LETTER OF SUBMISSION

Date:
To
Md. Aiyub Islam
Professor,
Department of Accounting & Information Systems,
University of Chittagong.

Subject: Solicitation for acceptance of the Term Paper.

Dear Sir,
I have pleasure in forwarding my term paper on Break-even Point Analysis that have assigned me to prepare as the practical requirement of my BBA (4th Year) course under the Department of Accounting and Information Systems, C.U. During preparing my report, I have learnt many interesting things about the break-even analysis of manufacturing and service industry. I have tried my level best to be conclusive & terse while preparing the report. My intention was never directed to undermine anyone concerned.

I sincerely hope that you would be kind enough to accept my term paper for evaluation and thus oblige thereby.

Sincerely yours;

………………………….
Md. Mosharof Hossen
Class Roll: 08301048
Session: 2007-2008
Department of Accounting & Information Systems,
University of Chittagong.

INTRODUCTION

Every company’s corporate managers have a goal of maximizing shareholder wealth. However, given that no obvious, single course of action leads to fulfillment of that goal, managers must choose specific course of action and develop plans and controls to pursue that course. Because planning is future oriented, uncertainty exists and information helps reduce that uncertainty. Controlling is making actual performance align with plans, and information is necessary in that process. Much of the information managers’ use to plan and control reflects relationships among product cost, selling prices, and sales volumes. Changing one of these essential components in the sales mix will cause changes in other components. Focuses on analyzing how volume, cost, profit helps in predicting future conditions (planning) as well as in explaining, evaluating, and acting on results (controlling). Before generating profit a company must first reach its break-even point, which means that it must generate sufficient sales revenue to cover all cost? .By linking cost behavior and sales volume, managers can use the break even analysis. Information provided by these BEP analyses helps managers focus on the implications that volume changes would have an impact on organizational profitability analysis. My objective is to analyze the term BEP analysis in a boarder sense with different costs concepts and other related matters which are needed to calculate BEP, providing the broad overview about BEP analysis and its implication in different aspect, which will ultimately help us to take different management decisions.

METHODOLOGY

I have collected the information for this term paper about BEP analysis by library work from different books, journals, articles, internet browsing, papers of professional’s degrees and different BEP practice of different company with online logging into their sites.

ABSTRUCT
Breakeven point analysis sometimes called cost volume-profit analysis, stresses the relationships between the factors affecting profits. Traditional break-even analysis is a relatively common managerial tool used in a wide variety of purposes for nearly all types of decision-making. Break-even analysis (sometimes called profit contribution analysis) is an important tool, which allows comparative studies between costs, revenues, and profits (Pappas and Brigham, 1981). This analytical technique facilitates the evaluation of potential prices, the impact of price changes and fixed/variable costs on profitability (Powers, 1987). This analysis can also be used to expedite decisions on investment return criteria, required market shares, and distribution alternatives (Kotler, 1984). Break-even...
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