Accounting Fundamentals: Break Even Analysis and Management Accounting Techniques

ACCOUNTING
FUNDAMENTALS

TABLE OF CONTENTS
QUESTION 1...................................................................................................................................3
a) Break even point......................................................................................................................3
b) Profit made on sale..................................................................................................................3
c) New profit figure.....................................................................................................................3
d) discussing the limitations of break even analysis ...................................................................4
QUESTION 2...................................................................................................................................4
a) .................................................................................................................................................4
b) Discussing the techniques with management accountant can achieve objectives of
management accounting ..............................................................................................................5
REFERENCES................................................................................................................................1

QUESTION 1
a) Break even point
BEP = Fixed cost / Contribution per unit
= 350000 / 5 (11-6)
= 70000 Units
Break even point in revenue: 70000 * 11
= 770000
from the above calculation it can be identified that the break even revenue for the Kerrigan
Ltd. In addition to this, the units of 70000 need to be developed by the organization in order to
obtain the situation of no profit or loss. Break even point will provide assistance in gaining
proper knowledge.
b) Profit made on sale
Sales 825000 (75000 * 11)
Less:
Variable cost 450000(75000 * 6)
Contribution 375000
Less:
Fixed cost 350000
Profit 25000
On the basis of above table it can be signified that profitability from making ale of
75000 units is 25000.
c) New profit figure
Sales 1040000 (80000 * 13)
Less:
Variable cost 560000 (80000 * 7)
Contribution 480000
Less: