COST AND
BREAK EVEN ANALYSIS
1. What
are the uncertainties a firm faces?
1) Dynamic nature of consumer needs
2) Diverse nature of competition
3) Uncontrollable nature of most elements of
cost
4) Continuous technological developments
2. How
is cost-volume-profit relationship determined?
The
most important method of determining cost-volume-profit relationship is Break
even
Analysis.
3. What
is Break even Analysis?
The
method of determining the cost-volume-profit relationship is known as Break
even
Analysis.
4. Who
are benefitted through Break even Analysis?
Break
even Analysis is useful for business executives, but also for an entrepreneur who
is
on
the threshold of setting up his own unit.
5. What
is the usefulness Break even Analysis?
Break
even Analysis is valuable for project appraisal executives, business
students,
accountants etc.
6. How
is the knowledge of Break even Analysis is helpful to business consultant?
The
knowledge of Break even Analysis is helpful to business consultant is useful in
order
to
provide right recommendations to their clients.
7. What
does break even Analysis involves?
Break even Analysis the study of revenue and costs
of a firm in relation to its volume of sales and specifically the determination
of that volume at which the firms costs and revenue will be equal.
8. What is breakeven point?
Breakeven point is defined as that level of sales
at which total revenue is equal to total costs and the net income is equal to
zero.
9. Write the relationship between breakeven point
and variable cost?
12.
How is BEP determined?
BEP's are
determined as
In terms of physical units In terms of money
13. What is break even chart?
Break even chart is defined as 'a
graphical presentation of fixed costs, variable costs and sales revenue for
various volumes of operations. It illustrates the profits or losses incurred at
different volumes of operations, the breakeven point and margin of safety'.
14.Give the formula for Selected operating point.
15.
Define (P/V) Ratio.
It is the ratio of contribution to sales, which is
expressed in terms of percentages. It is also called as 'Contribution
Ratio'.
16. How is Contribution Margin per unit
Determined? Contribution Margin=Sales-Variable costs
17. Define Marginal Ratio.
It is the ratio of contribution to sales, which is
expressed in terms of percentages. It is also called as 'Contribution
Ratio'.
20. What are the uses of BEA?
It
predicts the effects of change in price on sales.
It predicts the effects of change
on profitability of changes in costs and efficiency. 21. Write down the
limitations of break even Analysis?
BEP Analysis assumes costs and revenue to be
linear in function. This practice is not true. Break Even Chart is useful only
for single product companies.
22.
How is BEP determined In terms of physical units?
23.
How is BEP determined In terms of money?
24.
How is Contribution Ratio Determined?
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