After studying this chapter you should be able to:
Understand the concept of break-even point.
Know the assumptions underlying break-even analysis.
Understand the methods for determining the break-even-point: (i) graphical method and (ii) equations approach.
Construct break-even charts.
Understand and compute P/ V ratio—contribution to sales ratio.
Know the concept of margin of safety and compute it.
Appreciate the impact of variable cost, fixed cost and selling price on P/ V ratio, break-even point and margin of safety.
Understand the meaning of cost-volume-profit (CVP) analysis and its uses.
Know well the applications of CVP analysis.
Understand and construct a profit-path ...