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  • W.B.C.S. Main 2018 Question Answer – Management – Break-Even Analysis.
    Posted on January 9th, 2019 in Management
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    W.B.C.S. Main 2018 Question Answer – Management – Break-Even Analysis.

    WBCS মেইনস ২০১৮ প্রশ্নের উত্তর – পরিচালনা – বিরতি-এমনকি বিশ্লেষণ।

    A break-even analysis is a financial tool which helps you to determine at what stage your company, or a new service or a product, will be profitable. In other words, it’s a financial calculation for determining the number of products or services a company should sell to cover its costs (particularly fixed costs). Break-even is a situation where you are neither making money nor losing money, but all your costs have been covered.Continue Reading W.B.C.S. Main 2018 Question Answer – Management – Break-Even Analysis.
    Break-even analysis is useful in studying the relation between the variable cost, fixed cost and revenue. Generally, a company with low fixed costs will have a low break-even point of sale. For an example, a company has a fixed cost of Rs.0 (zero) will automatically have broken even upon the first sale of its product.

    Components of Break Even Analysis

    Fixed costs
    Fixed costs are also called as the overhead cost. These overhead costs occur after the decision to start an economic activity is taken and these costs are directly related to the level of production, but not the quantity of production. Fixed costs include (but are not limited to) interest, taxes, salaries, rent, depreciation costs, labour costs, energy costs etc. These costs are fixed no matter how much you sell.
    Variable costs
    Variable costs are costs that will increase or decrease in direct relation to the production volume. These cost include cost of raw material, packaging cost, fuel and other costs that are directly related to the production.

    Calculation of Break-Even Analysis

    The basic formula for break-even analysis is driven by dividing the total fixed costs of production by the contribution per unit (price per unit less the variable costs).

    Contribution Margin

    Break-even analysis also deals with the contribution margin of a product. The excess between the selling price and total variable costs is known as contribution margin. For an example, if the price of a product is Rs.100, total variable costs are Rs. 60 per product and fixed cost is Rs. 25 per product, the contribution margin of the product is Rs. 40 (Rs. 100 – Rs. 60). This Rs. 40 represents the revenue collected to cover the fixed costs. In the calculation of the contribution margin, fixed costs are not considered.

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