This document welcomes members of the Industrial Engineering & Management team and discusses production cost concepts. It defines production cost as the amount spent in the production process, including material, labor, and other expenses. Material costs are further divided into direct material costs and indirect material costs. Expenses are classified as either fixed or variable. The document also discusses break-even analysis, which finds the point where revenues and costs are equal, resulting in neither profit nor loss. It explains how to calculate the break-even point using a formula and presents a graphical representation of break-even analysis using a chart.

1. WELCOME…….
WELCOM
E
GREETINGS TO

2. INDUSTRIAL ENGINEERING &
MANAGEMENT

3. TEAM MEMBERS
BINCY JOY
DEEPU ABRAHAM
DIESH D
RIBU JACOB MATHEW

4. PRODUCTION COST
CONCEPT &
BREAK-EVEN
ANALYSIS

5. PRODUCTION COST
“DEFINED AS THE AMOUNT OF
EXPENDITURE INCURRED IN THE
PROCESS OF PRODUCTION”
MATERIAL LABOUR
COST:COST OF COST:COST OF EXPENSES:ALL
COMMODITIES REMUNERATION COLLECTIVE
SUPPLIED TO OF THE COSTS OTHER
AN EMPLOYEES OF THAN MATERIAL
UNDERTAKING THE & LABOUR COST
ENTERPRISE

6. MATERIAL COST
INDIRECT MATERIAL
DIRECT MATERIAL COST:COST NOT
COST:COST DIRECTLY DIRECTLY REQUIRED
ESSENTIAL FOR THE
COMPLETION OF THE FOR THE
PRODUCT COMPLETION
FOR EG:Fe,Ni,Cr OF THE PRODUCT
TO MAKE ALLOYS
FOR EG:COTTON
WASTE,GREASE,SANDPAP
ER

9. INDIRECT EXPENSE
FIXED EXPENSE VARIABLE COST
EXPENSES THAT EXPENSE THAT
REMAINS VARY DIRECTLY
RELATIVELY WITH VOLUME OF
CONSTANT PRODUCTION
REGARDLESS OF EG:DEPRECIATION
THE VOLUME OF OR WEAR & TEAR
PRODUCTION OF EQUIPMENTS
EG:TAXES ON ARISING FROM USE

10. RIME COST[TOTAL COST]
++
PRIME COST
DIRECT (VARIABL DIRECT
E)DIRECT MATERIA
LABOUR EXPENSE
COST L COST
S

11. AK-EVEN ANALYSIS
<<BREAK-EVEN ANALYSIS IS CONCERNED
WITH FINDING THE POINT AT WHICH REVENUES
& COSTS AGREE EXACTLY OR THE POINT AT
WHICH TOTAL REVENUE EQUALS TOTAL COST-
HENCE THE TERM “BREAK-EVEN”
<<THE BREAK-EVEN POINT IS
,THEREFORE,THE VOLUME OF OUTPUT AT
WHICH NEITHER A PROFIT IS MADE NOR A
LOSS IS INCURRED

12. ~IMPORTANCE OF BREAK-EVEN ANALYSIS~
BREAK-EVEN ANALYSIS SOLVES THE FOLLOWING
PROBLEMS:
>A>WHAT SALES VOLUME WILL BE NECESSARY TO
COVER:
*A REASONABLE RETURN ON CAPITAL EMPLOYED
*PREFERENCE & ORDINARY DIVIDENDS
*RESERVES
>B>COMPUTING COSTS & REVENUES FOR ALL VOLUMES
OF OUTPUT TO FIX BUDGET SALES
>C>TO FIND ARTICLE PRICE FOR DESIRED OUTPUT
>D>TO DETERMINE VARIABLE COST PER UNIT
>E>TO COMPARE A NUMBER OF BUSINESS
ENTERPRISES BY ARRANGING THEIR EARNINGS IN
ORDER OF MAGNITUDE

13. CALCULATION OF BREAK-EVEN
POINT
BREAK-EVEN POINT CAN BE CALCULATED BY
USING THE FOLLOWING RELATION:
BREAK-EVEN POINT = FC
1 – V/P
WHERE: FC-FIXED COST
V-VARIABLE COST/UNIT
OR TOTAL VARIABLE COST
P-SELLING PRICE OF EACH UNIT
OR TOTAL SALES REVENUE

14. GRAPHICAL REPRESENTATION OF BREAK-EVEN ANALYSIS*
In 1930’s Walter Rautenstrauch,an industrial
engineer and professor of Columbia
University,invented the planning device known
as a “Break-Even Chart”
DEFINITION OF BREAK-EVEN CHART
#A Break-Even chart is a graphical representation
between costs and revenue at a given time
#It is a graphic device to determine the break-even
point and profit potential under varying conditions
of output and costs

15. *GRAPHICAL REPRESENTATION OF BREAK-EVEN ANALYSIS
SALE REVENU PROFIT
S E
TOTAL COST
BE
FIXED COST-IN P
V
RUPEES
C
FC
LOSS VC-VARIABLE
COST
FC-FIXED COST
UNITS OF OUTPUT BEP-BREAK-EVEN
POINT
TOTAL COST=FIXED COST=VARIABLE
COST