Industrial engg managt break even analysis
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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.
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Okay, let's solve this step-by-step:
Given: TC = 4000 + 5Q + 10Q2
Quantity (Q) = 10 units
1) Total Fixed Cost (TFC) = 4000 (Given fixed cost)
2) Average Fixed Cost (AFC) = TFC/Q
= 4000/10 = 400
3) Total Variable Cost (TVC) = 5Q + 10Q2
= 5(10) + 10(10)2 = 50 + 1000 = 1050
4) Average Variable Cost (AVC) = TVC/Q
= 1050/10 = 105
5) Average Total Cost (ATC) = TC/Q
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- Cost curves like AVC, ATC, and MC are U-shaped based on the law of diminishing returns in production. Minimum efficient scale is where long-run average costs are minimized.
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Okay, let's solve this step-by-step:
Given: TC = 4000 + 5Q + 10Q2
Quantity (Q) = 10 units
1) Total Fixed Cost (TFC) = 4000 (Given fixed cost)
2) Average Fixed Cost (AFC) = TFC/Q
= 4000/10 = 400
3) Total Variable Cost (TVC) = 5Q + 10Q2
= 5(10) + 10(10)2 = 50 + 1000 = 1050
4) Average Variable Cost (AVC) = TVC/Q
= 1050/10 = 105
5) Average Total Cost (ATC) = TC/Q
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virudhunagar
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Similar to Industrial engg managt break even analysis (20)
A PROJECT REPORT ONBREAK EVEN CHART. by INDRAKUMAR R PADWANI ...
A PROJECT REPORT ONBREAK EVEN CHART. by INDRAKUMAR R PADWANI ...
A PROJECT REPORT ON BREAK EVEN CHART BY Indrakumar Padwani.pptx
A PROJECT REPORT ON BREAK EVEN CHART BY Indrakumar Padwani.pptx
Industrial engg managt break even analysis
- 1. WELCOME……. WELCOM E GREETINGS TO
- 3. TEAM MEMBERS BINCY JOY DEEPU ABRAHAM DIESH D RIBU JACOB MATHEW
- 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