We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Managerial Accounting - Essay Example

Comments (0) Cite this document
Summary
Date: 13th April, 2012 Breakeven Analysis Introduction Profit and loss are the two major concerns that every business manager gives importance. Profits are generally welcomed by the managers conversely losses are viewed as a disturbance in the operations of a business…
Download paper
GRAB THE BEST PAPER
Managerial Accounting
Read TextPreview

Extract of sample
Managerial Accounting

This article mainly discusses Breakeven Analysis such that the first section highlights the definition of breakeven point along with its graphical representation. Next section describes the importance of breakeven analysis. Last part of this article outlines the implications of breakeven analysis followed by the conclusion which summarize the article. Breakeven Point The level of sales or production quantity which can bring the company in a position where it neither generates any profits nor incur any losses, that point is called as breakeven point or level (tutor2u). When a particular product is manufactured, it has mainly two components which are variable costs and fixed costs. In order to reach at the breakeven level of sales, variables costs are deducted from the sales to arrive at the contribution margin. The percentage of that contribution margin with respect to sales is then compared with fixed costs resulting in the breakeven level of sales. If the contribution margin is provided in per unit terms, then break even quantity to be sold would be found. Following are the formulae for Breakeven Sales Level and Breakeven Quantity: Breakeven Sales Level = Fixed Cost / Contribution Margin (%) Breakeven Quantity = Fixed Cost / Contribution Margin (per unit) Where, Contribution Margin = Sales – Variable Cost Graphical Representation Graphically, breakeven points can also be identified with the help of the following diagram, where it can be observed that the point of intersection between lines OA and BC where line OA describes the normal sales level and BC denotes the total cost of the product comprising both variable and fixed costs. The point Q denotes the breakeven quantity. It is important to note that at point P, the firm is neither incurring any loss nor generating any profit and that is the breakeven point for the sales level. Reasons for Breakeven Analysis There are different reasons due to which business managers are keen to undertake this analysis such that future planning of operating activities, setting sales objectives, avoiding losses, estimating sales and costs forecasts etc. All these reasons are discussed as under: Future Planning Breakeven analysis helps business managers in undergoing rigorous future planning about the different products. By virtue of this analysis, some products are removed from the product line which can no longer generate profits, some of the products are added in as they have the capacity to generate some profits. At the same time some existing products are also continued with as their breakeven analysis provides them the likelihood of earning some profits. Setting Sales Objectives In order to motivate the sales force, breakeven analysis is conducted and then sales force is provided some targets to achieve. As per meeting the different levels of target sales, the company’s profits increase at the same time it adds up more rewards to the sales force. Avoiding Losses The next major reason for the breakeven analysis is the avoidance of losses. Since the most preferred objective of a company is to avoid losses at any costs, therefore the business managers, conduct this analysis which reveals as which product can be sold in what quantities in order to establish different quantity levels of sales. If a given product’s breakeven quantity is too high and the company does not realize that this much quantity they can actually sold, it means that product will surly incur some losses. So it is ... Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Managerial Accounting Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Retrieved from https://studentshare.net/other/7251-managerial-accounting
(Managerial Accounting Essay Example | Topics and Well Written Essays - 1000 Words)
https://studentshare.net/other/7251-managerial-accounting.
“Managerial Accounting Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.net/other/7251-managerial-accounting.
  • Cited: 0 times
Comments (0)
Click to create a comment
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Managerial Accounting
In order to remedy this situation, a company would likely use short-term loans to pay employees what they are owed. This would then take wages and salaries out of liabilities and replace them with debt. On the other hand, it is sometimes possible that a company has money to pay their employees before they actually have to do so.
4 Pages(1000 words)Essay
Managerial accounting
Manufacturing overhead for application to jobs during December Manufacturing overhead for December= total manufacturing overhead – manufacturing overhead till November =2400000- 2200000 =200000 Optic Vision would apply $ 200000 of manufacturing overhead during December.
4 Pages(1000 words)Essay
Managerial accounting
The conventional accounting impact uses the basic accounting principle of “Matching”. The Matching concept is basically a “fundamental concept of accrual basis accounting that offsets revenue against expenses on the basis of their cause-and-effect relationship.
11 Pages(2750 words)Essay
Managerial Accounting
The objective of the internal accounting system is to generate financial information that will streamline operational costs. As a result the operations can be made more efficient. In order to meet the objective of cost control, the accounting system provides information in several areas: cash receipts, cash disbursements, petty cash, payroll and fixed assets (Hill and Jones, 2007).
3 Pages(750 words)Essay
Managerial Accounting
As a marketing manager for the Crunchy Cookie Company, I would not underestimate sales for a number of reasons. Cookies are frequently eaten edibles and underestimating its sales might create a shortage of products. If the budget is inappropriate, materials are ordered in accordingly and will not result in an increase in sales.
2 Pages(500 words)Essay
Managerial accounting
Yet our experience since the early part of this decade has shown this to be an illusion. Massive accounting irregularities and scandals, involving large
8 Pages(2000 words)Essay
Managerial accounting
It states that, in measuring net income for an accounting period, the costs incurred in that period should be matched against the revenue generated in the same
11 Pages(2750 words)Essay
Managerial Accounting
The outflows are calculated multiplying 200 times $500 which equals $100,000. The 200 is the days the lodge is open and $500 are the daily expenses. The 20
3 Pages(750 words)Essay
Managerial accounting
Management accountants seem to be moving from their traditional roles of being scorekeepers and controllers in an organization to playing a strategic role. This essay will analyze the changing role of management accountants in modern day businesses by looking at the
9 Pages(2250 words)Essay
Managerial Accounting
To determine the effect that Machine Hours has on the total cost of production, a relationship needs establishing through the straight line passing through the coordinates. Where this
3 Pages(750 words)Essay
Let us find you another Essay on topic Managerial Accounting for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us