EEM is an important subject along with other engineering subjects. This presentation will give you the brief introduction about Break Even Analysis.

1. “Break Even Analysis”

2. Highlights of The Presentation
 What is break even point?
 Assumptions of Break Even Analysis.
 Limitations of Break Even Analysis.
 Graphical representation of Break Even Analysis.
 Introduction to Market.
 Elements of Market.
 Classifications of Market.

3. What Is Break Even Point ???
 It is a point for a product where the value of total revenue received is
equals to total cost associated with the sale of the product.
 The break even analysis is determined to analyze the potential
profitability of an expenditure in a sales based on business.
 In production, at a certain point no profit or no loss is been
considered.
 This point is called as Break Even Point.

4. Assumptions of Break Even Analysis
are…..
 Total cost should be separated in to fixed and variable cost.
 Fixed cost will be remain fixed at all the levels of production.
 Variable cost varies with direct proportional to the volume of
product.
 The selling price does not change with the change in quantity of
sale.
 Whatever product is sold.
 Production and sales will be unchanged.
 It is considered for producing only one product.

5. Limitations of BEA are as followed…..
 It is difficult to separate fixed and variable costs clearly.
 Semi-variable cost are not considered in the analysis.
 It ignores the time element over a long period all cost changes and
hence comparison of performance between two period on the basis
of contribution is not possible.
 It requires the separate department or team of people to carry this
operation leading to extra expenditure of an organization.
 The frequent changes happening in selling prices of the product
affects the reliability of BEA.

6. Limitations……..
 Fixed cost are assumed to be constant irrespective of production
while doing this analysis which sometimes can be lead to wrong
estimate as fixed cost sometimes change with change in production.
 If the amount of fixed cost of the two firms differ, the comparison of
both firms on the basis of contribution is likely to mislead.
 BEA ignore the fact that competitors may change their product or
prices.
 If complete data on cost structure of a product is not available then
there is no benefit of doing this analysis as it would yield incorrect
result.

7. Graphical Representation of BEA…..

8. Graphical Representation of BEA…..
 Fixed Cost (FC) doesn’t change with changes in output.
 But Variable Cost (VC) does change with change in output.
 Profit Volume Ratio (P V Ratio) is stated relationship between
contribution and sales.
• It is considered for determining the profit of business.
• It is contribution of sale per rupee.
• P V Ratio measures the rate of change of profit due to change in
volume of sales because of fixed cost is constant for a short term
period.

9. Basic meaning of MARKET is ……
 All those buyers and sellers who influence the price of good or
service is called Market.
 A market need to be formal and also placed at a proper place.
 In studying market economy, it is extremely important to understand
how the price of product is determined.
 The market fixes the price at which those who want to buy
something can buy from those who want to sell that product.

10. Elements of MARKET are as followed …..
1) Buyers: If there is demand of any product or service in market,
only then the production and sale come in role.
2) Sellers: If the trader is not prepared to sell the product at certain
price, the product can not buy by buyers.
3) Availability of product or service: If the product or service is
available in the market, then only it will buy or sold by buyers and
sellers.
4) Contact: There should be smooth and proper contact between
buyers and sellers. Both should have knowledge of deal through a
medium.
5) Price: Exchange takes place when both are agree upon a price of a
commodity.

11. Types of MARKET is Based on ………
 Area
 Time
 Nature of Transaction
 Regulation
 Volume of business
 Competitions.

12. In according to AREA ……
 On the basis on geographical area covered, markets are classified as
1) Local Market: Perishable goods like butter, milk, eggs, vegetables have local
markets. Because these type of goods expire in very short period of time.
2) Regional Market: Semi durable goods generally command a regional market.
3) National Market: Durable goods and industrial items are generally exchanged
in this market.
4) International Market: Precious commodities like gold, silver are traded in
these type of markets.

13. On the basis of TIME, the MARKETS
are…
1) Very short period Market: In this market the commodities are
perishable and supply of commodities can not be change at all.
• In a very short period market the market supply is almost fixed and it
can not be commodities like vegetables, flower, fish, eggs, etc.
2) Short Period Market: It is the period which is slightly long then
the previous one. The supply of output will increases with the
increasing the employment of variable factor with the given fixed
capital equipment.

14. Continued ………….
3) Long Period Market: In this type of market, the time for alternate the
production is more than short and very short period markets. The supply of
commodities increases by installing the new plant or machinery.
4) Very Long Period Market: The period is very long in this market. The
factors of the market may be the population, capital supply, supply of raw
material, etc.

15. On the basis on Nature of Transaction….
1) Spot Market: This type of market refer to those market where
goods are in physically transacted on the spot.
2) Future Market: This type of market involves contracts of a future
date.

16. On the basis of REGULATION……..
1) Regulated Market: In this market, transections are statutorily
regulated so as to put an end to unfair practices.
• Such markets may be established for specific products or for a
group of products. Eg. stock exchange
2) Unregulated Market: It is called as free market. There are no
restrictions on the transections.

17. On the basis of Volume of Business …...
1) Wholesale Market: It is the market where the commodities are
bought and sold in bulk quantities.
2) Retail market: Where commodities are sold in small quantities, it
is called as retail market. It is the market for unlimited consumers.

18. On the basis on COMPETITIONS…….
1) Competitive market
2) Monopoly
3) Imperfect competition
4) Oligopoly
5) Duopoly.
6) These type of markets based on degree of competition.

19. Thank You