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Break Even Chart

A break-even chart graphically represents the relationship between costs, volume, and profit using marginal costing to show profitability at different activity levels. It indicates fixed costs, variable costs, total costs, total revenue, the break-even point, margin of safety, and angle of incidence. The assumptions underlying the chart are that costs can be separated into fixed and variable, fixed costs remain constant with output, and there are no changes in product specifications, methods, efficiency, pricing, or opening/closing stock.

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87 views1 page

Break Even Chart

A break-even chart graphically represents the relationship between costs, volume, and profit using marginal costing to show profitability at different activity levels. It indicates fixed costs, variable costs, total costs, total revenue, the break-even point, margin of safety, and angle of incidence. The assumptions underlying the chart are that costs can be separated into fixed and variable, fixed costs remain constant with output, and there are no changes in product specifications, methods, efficiency, pricing, or opening/closing stock.

Uploaded by

amit dava
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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BREAK EVEN CHART

A Break- Even Chart is a graphical representation of Marginal Costing (CVP Analysis). It


shows the inter-relationship between Cost, Volume (Sales or Revenue) and Profit. It is a very
important tool for Profit Planning as it shows the profitability of a business at various levels
of activity and as a result indicates the Break-Even Point.

A Break- Even Chart indicates the following:

1. Fixed Cost, Variable Cost and Total Cost.

2. Total Revenue or Sales.

3. Break-even point

4. Margin of Safety.

5. Angle of Incidence.

Assumptions Underlying the Break-Even Chart:


1. All costs can be segregated into fixed and variable cost.

2. Fixed cost will remain constant irrespective of the level of output.

3. There will be NO CHANGE in product specification, manufacturing methods, operating


efficiency and pricing policy.

4. The no of units produced and sold are same. There is no opening or closing stock.

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