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Cost Accounting by V. Rajasekaran, R. Lalitha

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17

Break-Even and Cost–Volume–Profit Analysis

LEARNING OBJECTIVES

After studying this chapter you should be able to:

  1. Understand the concept of break-even point.

  2. Know the assumptions underlying break-even analysis.

  3. Understand the methods for determining the break-even-point: (i) graphical method and (ii) equations approach.

  4. Construct break-even charts.

  5. Understand and compute P/ V ratio—contribution to sales ratio.

  6. Know the concept of margin of safety and compute it.

  7. Appreciate the impact of variable cost, fixed cost and selling price on P/ V ratio, break-even point and margin of safety.

  8. Understand the meaning of cost-volume-profit (CVP) analysis and its uses.

  9. Know well the applications of CVP analysis.

  10. Understand and construct a profit-path ...

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