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UNIT 16 BREAK EVEN ANALYSIS

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  UNIT 16 BREAK EVEN ANALYSIS   The concept of break even analysis is a logical extension of marginal costing. It is based on the same principle of classifying the costs into fixed and variable.   The study of cost-volume-profit relationship is some time called as “break even  analysis.   Break even analysis can be interpreted in two senses – narrow and broad sense. In narrow sense, it refers to determine the level of output where total costs equal to total revenue i.e. no profit, no loss. In the broad sense, it is used to determine the probable profit at any level of output.   BREAK EVEN POINT It is a point where sales revenue equals the costs to make and sell the product and no profit or loss is reported.   Charles T. Horngren define it, “the breakeven point is that point of activity (sales volume) where total revenues and total expenses are equal, it is the point of zero profit and zero loss.”   There are two methods of ca...
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UNIT 15 MARGINAL COSTING

  UNIT 15 MARGINAL COSTING SEGREGATION OF MIXED COSTS The elements of cost can be divided into two categories. Fixed and variable costs. For decision making, it becomes necessary to segregate the mixed costs into fixed and variable costs.   Methods of Segregating Mixed Cost 1) Analytical Method : A careful analysis of mixed cost is done to determine how far it varies with production. 2) High Low Method : This technique was developed by J.H. William. In this method, the difference in two production levels i.e. highest and lowest, are compared out of the various levels. 3) Scatter Diagram Method In this method, production and semi-variable cost data are plotted on a graph paper and tentative line of best fit is drawn. 4) Method of Least Square This method is based on econometric technique, in which line of best fit is drawn with the help of linear equations.   CONCEPT OF MARGINAL COST ANDMARGINAL COSTING The elements of costs are material, lab...
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UNIT 14 RESPONSIBILITY ACCOUNTING

  10-04-2023 UNIT 14 RESPONSIBILITY ACCOUNTING Eric L. Kohler defines responsibility accounting as “a method of accounting in which costs are identified with persons assigned to their control rather than with products or functions”. Responsibility accounting, also called “Responsibility reporting” is a system of responsibility reporting and control at each managerial level. It is built around functional activity for which specific managers are accountable.   DESIGN OF THE SYSTEM (four fundamental principles or techniques of responsibility accounting) 1) Establishing Responsibility Centers 2) Limits to Controllable Costs 3) Flexible Budgeting 4) Performance Reporting   USES OF RESPONSIBILITY ACCOUNTING i) Performance Evaluation ii) Delegating Authority: iii) Motivation iv) Corrective Action v) Management by Objectives vi) Management by Exception vii) High Morale and Efficiency   ESSENTIALS OF SUCCESS OF RESPONSIBILITY ACCOUNTING...
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