Accounting Fundamentals: Break-even Point Calculation, Profit Analysis, and Management Accounting Techniques

MODULE CODE: LCBB4001
ACCOUNTING
FUNDAMENTALS

Table of Contents
QUESTION 1...................................................................................................................................2
a. Calculation of break- even point.............................................................................................2
b. Profit when 75000 units will be prepared...............................................................................2
c. New profit...............................................................................................................................3
d. Limitation of BEP...................................................................................................................3
QUESTION 2...................................................................................................................................3
a. Importance of management accounting and difference from financial accounting................3
b. Three techniques through which management accountant can achieve objectives of
management accounting..............................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

QUESTION 1
a. Calculation of break- even point
Particulars Formula Figures
Selling price per unit 11
Less: Variable cost per unit 6
Contribution per unit
Selling price per unit - vari-
able cost per unit 5
Fixed cost 350000
BEP (in units)
Fixed cost / contribution per
unit 70000
BEP (in value or revenue)
BEP (in units) * selling price
per unit 770000
Interpretation- from the above calculation it is clear that the BEP units is 70000 and this reflects
that this is the position where the company will be in no profit and no loss situation. This means
that if the company will produce beyond the 70000 units then they will start earning more of
profits.
b. Profit when 75000 units will be prepared
Particulars Cost per unit no of units sold
Selling price per unit 11 75000 825000
Less: Variable cost per unit 6 75000 (450000)
Contribution per unit 5 75000 375000
Less: Fixed cost (350000)
Total profit 25000
Interpretation- when the company will be earning the units of 75000 then the profit earned by the
company will be 25000. This is particularly because of the reason that the selling price is 11 and
the number of units sold is 75000 so the total sales value is 825000. Further after deducting the
variable cost and the fixed cost from the total sales then the profit will arrive which is 25000.