BREAK EVEN ANALYSIS
- An important tool used by production manager to analyses the profit or loss possible in future
- This cost remains fixed or constant irrespective of no. of quantity produced
- Fixed cost can be changed. It fixed up to certain value of production.
- Fixed cost varies directly with volume of production
- It is the sum of fixed cost and variable cost.
Assumption in BEP
- There is a linear relationship between sales volume and cost
- Only number of quantities will affect the cost
- Selling price is constant
- Number of quantities produces and sales are always equal
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