IT talks about break even analysis,how does it help the company in choosing a location,IT talks about the importance and limitations of the analysis.

1. LOCATIONAL BREAK
EVEN ANALYSIS
NIKITA NALAVADE

2. INTRODUCTION

3. ASSUMPTIONS
• Cost divided into fixed and variable cost
• Constant fixed cost
• Variable cost fluctuate in direct propotion to volume
of output
• Constant selling price
• No change in technology and production method
• Unit of production=sales

4. IMPORTANCE
Impact
on
Profit
Determine
selling price
Strategy
Planning
Determine
target
capacity

5. EXAMPLE
• Ice factory location
Annual Demand =3000 units
Selling price/unit=Rs 300/unit
Total Cost=Fixed cost+(Variable Cost*Demand)
SITES FIXED COST(F) VARIABLE COST(V) F+(V*Demand)
MUMBAI 50000 135 4,55,000
AHMEDABAD 100000 110 4,30,000
BANGALORE 120000 120 4,80,000

6. • From the above table we come to know that
the lowest total cost is for Ahmedabad for
annual demand of 3000 units
• Hence the ice cream factory should be
established at Ahmedabad.

7. FACTORS AFFECTING LOCATION
DECISION
CONSUMER
PROXIMITY
FREE TRADE ZONES
AVAILIBILITY OF SKILL
LABOUR
SUPPLIERS
ENVIRONMENTAL
POLICIES

8. LIMITATIONS
• Its accuracy depends on accuracy of the data
• Long term forecasting is difficult
• Depreciation is not considered
• Output may not be equal to sales
• Products not sold at the same price at
different levels of output

9. THANK YOU