This document discusses cost classification, cost-volume-profit (CVP) analysis, and break-even point (BEP) analysis. It defines cost classification as segregating costs into categories to inform decision making. CVP analysis examines how variable costs, fixed costs, and sales volume impact operating profit. BEP analysis determines the sales level where total revenue equals total costs and the business is no longer losing money. The document provides an example of a CVP analysis to calculate the price and sales needed for a business to achieve its profit target.

1. Classification of cost,CVPAnalysis and BEP
Paper name – Economics for Engineers
Paper code – HS-HU601
Student Name – Anal Bhandari
University Roll - 13000320114
Department - ECE

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Content:
 Cost Classification
 Types of cost classification
 Basis of cost classification
 CVPAnalysis
 BEPAnalysis
 Example of CVPAnalysis

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Introduction:
What is Cost Classification?
 Cost Classification is the process of segregating the
company’s costs into different categories that gives a
fair idea to the decision-maker about the spending
pattern. This bifurcation allows teams to efficiently use
the data for accounting purposes and financial
modeling, leading the management to decide which
cost is more important than others.

4. Types of Cost Classification:-
Basis of Cost Classification:-
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5. What Is Cost-Volume-Profit (CVP)
Analysis?
Cost-volume-profit (CVP) analysis is a method of cost accounting that looks
at the impact that varying levels of costs and volume have on operating profit.
 Cost-volume-profit (CVP) analysis is a way to find out how changes in
variable and fixed costs affect a firm's profit.
 Companies can use CVP to see how many units they need to sell to break
even (cover all costs) or reach a certain minimum profit margin.
 CVP analysis makes several assumptions, including that the sales price,
fixed, and variable costs per unit are constant.
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Break-Even Point (BEP) Analysis
 In a business scenario, the break-even point is a perimeter at which the total expenses
of the enterprise equals the total revenue generated.
 Reaching this point indicates that a business has overcome all the
expenses and is no more in a state of loss. Break-even point =Fixed cost/Price per
cost – Variable cost

7. Example of CVPAnalysis
XYZ wishes to make an annual profit of 1,00000 INR from the sale of appliances. Details of
manufacturing and annual capacity are as follows:
Production Capacity: 10,000 units Fixed Cost: 30,000 INR
Variable Cost/Unit: 30 INR Based on the above information,
let’s plug the numbers in the CVP equation: No of Units Sold x Price Per Units = No of units Sold x
Variable Cost Units + Fixed cost + Profit
10000 x P= (10000 x 30) + 30000+ 100000
10000P = (300000+30000+100000)
10000P= 430000
Price per unit= (430000/10000) = 43
Thus price per unit comes out to 43 INR, which implies that XYZ will have to price its product at 43
INR and need to sell 10,000 units to achieve its targeted profit of 1,00000 INR.
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Conclusion:-
Engineering economics poses numerous benefits because it
allows those in industry to make strategic decisions for their
companies. While macroeconomic and financial competencies
are key for business operations, engineering economics further
provides a mechanism for decision-making.

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Thank You