After BEP is determined, the finance manager plans for profits. This can be done in three ways. They are as follows:

  1. Increasing the sales volume;
  2. Increasing the sales price;
  3. Decreasing the cost, both fixed and variable.

20.3.1 Increase in Sales Volume

Since the volume of sales over and above the BEP allows a firm to reap profits, the firm, in normal course, plans to achieve a level of output and sales at a point beyond the BEP. It depends upon a couple of factors. One is the amount of profits the firm would like to earn; and the other is a certain margin of safety that the firm likes to maintain in view of the fact that a reduced level of activity as a result of reduction in demand may not put the firm ...

Get Fundamentals of Financial Management, Third Edition now with the O’Reilly learning platform.

O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.