Breakeven-analysis

THE EFFICIENCY OF THE SCIENTIFIC APPROACH IN ANALYSING THE BREAK- POINT IN A MULTI-PRODUCT FIRM, 2011

A major challenge in break-even analysis for multi-product firms is the problem of obtaining a single per unit contribution, single unit selling price and contribution margin ratio (CMR) that is representative of all the products in the firms' sales mix structure. This paper introduces a scientific approach, using weighted average, as against the simple average used in the traditional approach. Using the Weighted Average Unit Contribution Margin (WAUCM) as a stepping stone, the paper covers up with the Weighted Average Unit Selling Price (WAUSP) and the Weighted Average Contribution Margin Ratio (WACMR). These three averages presented scientific solutions to the multi-product breakeven analysis problems. In comparing the traditional approach with the scientific approach, the paper adopts "contribution by sales mix analysis" to ascertain the approach that gives the optimal sales mix. It was observed that the scientific approach achieved lower break-even point in units and sales value than the traditional approach. The success was attributed to the optimal sales mix achieved by the scientific method. Therefore the scientific approach is recommended for use by companies involved in the multi-product break-even analysis and problems relating to multi-product break-even computations. Introduction The Break-Even Analysis technically known as the Cost-Volume-Profit (CVP) analysis, represents the application of marginal costing principles that seeks to show the relationship between cost, volume and profit at different activity levels which could be relied upon for short-term planning and decision making. Owing to the centrality of the break-even point (BEP) on C-V-P analysis, break-even analysis is often used in place of CVP analysis. Break-even analysis is one of the most important tools for management decision. It takes into consideration the nature of variable costs and the capacity of fixed costs. The turning point in break-even analysis is the break-even point. The break-even point is the sales volume (activity level) in units or in sales value, where total sales revenue equals total cost. It represents the point at which the firm makes no profit and makes no loss. It depicts the point where the firm earns enough contribution to pay for fixed costs only. At the break-even point, all expenses of the company are effectively paid for. The essence of this analysis is to help in assessing the profit potentials of the firm beyond the break-even point. It is an analytical model for achieving targeted results.

Procedia Economics and Finance, 2014

The knowledge of the breakeven point allows the assessment of the impact on the exploatation profit any change of the volume of the activity, the price of the product the fix costs or of the variabil unit cost. This issue follows the emphasis on the breakeven point and the way of analizing the factors which influences it.The issue presents the breakeven point of the product and starting from an analysing model based on the physical volume of the activity there are 3 models which analyses the changes of the breakeven point through the value volume of the usage for the productive power and for the critical period.

International Journal of Management Excellence, 2017

This research paper is based on the contemporary techniques presented in the discipline of CVP Analysis. Techniques applied to carry out a complete and accurate financial analysis based on the CVP Analysis. In this paper, an application of theoretical concepts of the CVP Analysis has been realized. The quality of information and the recognition of specific features of business activity influence the achievement of a qualitative analysis. The cost-volume-profit analysis (CVP Analysis) is a powerful tool for planning and making decisions. Since the CVP analysis highlights the reciprocal cost ratio, the quantity sold and the price, it brings together all the financial information of the enterprise.

Reviews linear break-even analysis as typically outlined in textbooks on managerial economics. It is claimed that a major shortcoming of these expositions is their failure to demonstrate in what circumstances linear break-even analysis is relevant for a business and in what circumstances it is inapplicable. This article helps rectify this situation. It points out that such analysis can not be applied to perfectly competitive firms. However, in special circumstances, it might apply to a purely competitive firm. It is highly relevant for businesses operating in oligopolistic conditions where the kinked demand curve applies. Furthermore, it is applicable if imperfectly competitive firms follow fixed price rules. On the other hand, if imperfectly competitive firms, such as monopolists, adopt flexible pricing (for example, prices to clear whatever quantity of product they have supplied to the market) the linearity assumption involved in this type of break-even analysis will, as a rule, be violated. This is so because the firm’s total revenue will be a non-linear function of the quantity of the product supplied by the firm to the market. Nevertheless, because fixed price behaviour by businesses may be common, as well as constant average variable costs of production over a considerable range of output, linear break-even analyses has a considerable range of application to business.

Challenges of the Knowledge Society, 2015

Integrated in a competitive environment, the companies are forced to know better their costs, to determine as precisely as possible the sales prices and the profit margins achievable per product. When the entrepreneurs initiate a new business, invest in a new project or when they supervise the current work, the study of breakeven allows minimizing of the risks and the uncertainties, and also allows measuring the performance of the projects. Break-Even is an indicator that allows the company management to set minimal commercial targets to meet the expenses of the enterprise or that sets the degree of utilization of production capacities in relation to a desired level of profit. It highlights the correlations between the dynamic of production, implicit of income and the dynamic of costs, grouped into variable costs and fixed costs. Used in a prospective fashion, Break-Even allows planning and optimizing of the enterprise's sales and costs, not only short-term but also medium and long term.

Economica, 2021

In market economy, the purpose of any economic agent is to obtain profit from his economic activity. Profitability is considered a decisive tool for boosting the market economy mechanism, being a form of expressing the economic efficiency of the company to make a profit. Thus, the basic objective of the enterprise is profit and, in order to achieve the proposed goals, it is necessary to perform the analysis and periodic control of the activity, of the economic and financial situation, the state of performance within it. Depending on this, we consider optimal the use of the breakeven point in the performance analysis, an indicator that must be accepted as a financial instrument of analysis and control. In this article will be revealed the essence of the breakeven point, will be presented the importance, its forms of manifestation and calculation methods. A new interpretation in the calculation methods are proposed. Also, some productive situations will be presented depending on the b...

Ekonomski horizonti, 2019

The break-even point model is a well-known instrument for determining target production, income and costs for the purpose of gaining a zero profit. Although it is a concept that was present in the literature as early as in the late XIX century, the break-even point is applied in the contemporary business practice even today. This paper aims to demonstrate the advantages and limitations of the traditional (linear) and contemporary (nonlinear) break-even models. Particular attention is paid to the assumptions needed for a successful application of both models. The frequency of the use of the break-even point, limitations and assumptions were studied on a sample of 100 manufacturing enterprises in Bosnia and Herzegovina. The research study has revealed management's awareness of the potentials for applying the break-even point concept and the need to use the modern models that include assumptions pertaining to change in the key variables in the model. This results in the need to design such nonlinear, dynamic and stochastic models that best represent the dynamic conditions of contemporary business.

International Journal of Research, 2020

This study was obtained from the balance sheet and income statement of CV Bata Cikarang Indonesia in 2018, then the title is: Break Event Point Analysis on CV Bata Cikarang Indonesia. The goal is to find out the performance of CV Bata Cikarang seen from the company's Break Event Point. The research method is Field Research by visiting research objects and conducting interviews, and Library Research by exposing existing data in the form of Balance Sheet and Profit and Loss reports, and sales of data in the form of quantitative data and in the form of descriptive. Break Event Point analysis is performed to determine the company's financial performance, can also be used as a reference in making decisions that affect the company's future. As for the results in 2017 the BEP unit is 1,055,194 and the rupiah BEP is IDR 422,077,922 and 2018 the BEP unit = 1,027,397.26 and the IDR BEP is IDR 462,392,108.

A major challenge in break-even analysis for multi-product firms is the problem of obtaining a single per unit contribution, single unit selling price and contribution margin ratio (CMR) that is representative of all the products in the firms' sales mix structure. This paper introduces a scientific approach, using weighted average, as against the simple average used in the traditional approach. Using the Weighted Average Unit Contribution Margin (WAUCM) as a stepping stone, the paper covers up with the Weighted Average Unit Selling Price (WAUSP) and the Weighted Average Contribution Margin Ratio (WACMR). These three averages presented scientific solutions to the multi-product breakeven analysis problems. In comparing the traditional approach with the scientific approach, the paper adopts "contribution by sales mix analysis" to ascertain the approach that gives the optimal sales mix. It was observed that the scientific approach achieved lower breakeven point in units and sales value than the traditional approach. The success was attributed to the optimal sales mix achieved by the scientific method. Therefore the scientific approach is recommended for use by companies involved in the multi-product break-even analysis and problems relating to multi-product break-even computations.

2022 International Conference on Decision Aid Sciences and Applications (DASA)

This paper aims at proposing a new basic model for the computation of break-even points for multiple product firms. The key and new component of the newly proposed break-even models was an equivalent unit conversion factor. We have demonstrated that this new computational method of break-even point for multiple product firms provided a unique break-even solution for any product chosen as a based product on both the basic model. Their unique solutions indicate that the newly proposed break-even models are robust. We also demonstrated that the newly proposed break-even model gives us the true breakeven for any combination of the products or sales mix, assumed constant in the traditional basic break-even model. These newly proposed break-even models are thus applicable in the actual operation of the multiple product firm with a basic cost structure.