Sunday, June 8, 2008

Break even Analysis

Break even Analysis: It is a graphical representation that shows the relationship between cost and revenues. Cost is divided into two types e.g. fixed cost and variable cost. We know at break even point (TC=TR), hence no profit. Break even analysis specify the level of output that must be achieved in order to recover all the cost of operations through revenues. BEP depends upon the selling price and operating cost structure of the product. We will find out the BEP for different locations and the location with earliest BEP will be selected for production site.
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