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BREAK EVEN ANALYSISBreak even analysis is mainly used to explain the relationship between the cost incurred, the volume operated at and the profit earned. To compute the breakeven point we let
S be selling price per unitVu be variable cost per unitQ be break-even quantitiesF be total fixed costsAt Breakeven point:
Total revenue (TR) = Total Cost (TC)
Total revenue will be given by SQ while Total cost (TC) = Vu Q + F
At break-even point (BEP) therefore:
SQ = Vu Q + FQ = F S- VuB.E.P (in units) = F S- Vu
Stock turnover ratio Meaning: this ratio establishes a relation ship between costs of goods sold and average inventory. Objective: the objective of component of this r
Cost Behavior A firm's cost position results from the cost behavior of its value activities. The cost behavior is based on a number of structural factors which influence cost
interest rates
underlying assumptions of breakeven analysis and the limitations of this.
Interest coverage ratio (or debt service ratio) Meaning: this ratio establishes a relationship among net profits before interest and taxes and interest on long debt. Obj
Anthony''s orchard
Ordering Costs These are incurred in getting purchased items into the company’s inventory or stores, and usually consist of clerical costs of: • Making the purchase demand.
Advantages of incremental budgeting a) The budget is stable and change is gradual b) Managers can operate their departments on a steady basis c) The system is relatively
PART 1 Carlton Ltd operates at capacity and makes glass-topped dining tables and wooden chairs which are then typically sold as sets of four chairs with one table. However, some c
Problem: Fancy Foods Ltd uses a standard costing system to control its material and labour costs. The standard costs for January 2007 were as follows. Standard Costs Materi
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