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 ...

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