A Deep Analysis On Break-Even Point!

 

When we start a new business, it usually takes some costs and generates some revenue. If in case the cost is higher than revenue, it will be calculated as loss, and if not, then it will profit. So here is the question arises that what level of sales will the business starts earning a profit? It is very crucial to find out where the business will start making a profit covering all its costs.




The Break-even point is somewhat defined as the point where total costs and total sales are equal. The Break-even point describes whether there is no net profit or loss. The firm just “breaks even” if any organization wants to make a profit and desire to have a break-even point.

It might be possible that many of the students from you are students of accounting or finance are well-known with the concept of the break-even point. It is a simple concept, but when applied to a complex problem, the same concept will become a bit challenging, and this is what many students face while dealing with a Break-even point assignment.




Therefore, to handle the situation with ease, many students take Break-Even Point assignment help.

Benefits of Break-Even Analysis:-


It shows the lowest amount of business activity necessary to prevent losses;


It is useful when used with partial budgeting or capital budgeting techniques.


It ensures the viability of a business, project, investment etc.;


The relationship between production volume, cost, and returns can be seen;


It helps recognize the relevance of fixed and variable cost;

Limitations of Break-Even Analysis:-


There may be an affinity to continue to use a break-even analysis after the cost and income functions have changed;


It is best to the analysis of one product at a time;


It may be not easy to classify a cost as all variable or all fixed;


The applicability of break-even analysis is affected by frequent assumptions. Disobedience of these assumptions results in erroneous conclusions.



Understanding The Important Concepts Related To Break-Even Point Analysis from break-even point assignment writers:

To understand the implementation of Break-even Point better, let us understand the mathematical phase of the concept:

Break-Even Point = Fixed Cost/Contribution Margin

Contribution Margin = Price of Commodity-Variable Cost

Hence to understand these equations comprehensively, or you must be aware of the fundamentals on which these individual terms are based upon:





Fixed Costs concept: Fixed cost plays an influential role in the dynamics of working of a firm. Fixed costs are expenditures incurred by the already known company and could not fluctuate with outer stimuli, like the labour cost, loan on capital debt, interests, etc. This dimension helps the firm to decide the pricing for the particular commodity.






Contribution Margin concept: Contribution margin is an indispensable component of break-even point analysis. A contribution margin can be induced by deducting the variable cost from the selling price of an item.





The Concept of Contribution Margin Ratio: This ratio is expressed in percentage points. Thus the contribution margin ratio is calculated after deducting the fixed cost from the contribution margin. And this aspect provides the complete picture to the organization’s manager to take the necessary measure to meet the break-even point. Hence, this ratio helps the company make decisions like setting the labour cost, cost-cutting the unnecessary expenditures, etc.




Furthermore, it is helpful in business management too. The business management gets an insight into the business, and it can take steps to cut down the costs of the business so that the businesses can earn profits. Moreover, students can also ask for online assignment help from reliable experts available online to help them understand how to achieve cost leadership and increase optimum resource utilization.