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SUBMITTED TO SUBMITTED BY

PROF. POOJA CHOUBEY MONIKA SONIYA

MBA I YR

SIRT

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oBREAK EVEN ANALYSIS

o

PROFIT MAXIMISATION

oSALES MAXIMISATION.

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oIt refers to the ascertainment of level of operationswhere total revenue equals to total costs

oMethod of studying the relationship among sales,revenue, variable cost, fixed cost to determine the levelof operation at which all the costs are equal to the salesrevenue and there is no profit and no loss situation.

oImportant techniques is profit planning andmanagerial decision making.

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Where ,

contribution = selling cost variable cost

Fixed cost= contribution - profit

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Costs can be fixed or variable.

1.Variable cost are directly variable.

2. Fixed costs are stable.

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Break even chart

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1. It is cheap to carry out and it can show theprofits/losses at varying levels of output.

2. It provides a simple picture of a business - a newbusiness will often have to present a break-evenanalysis to its bank in order to get a loan.

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Break-even analysis is only a supply side (i.e. costsonly) analysis, as it tells you nothing about what salesare actually likely to be for the product at these variousprices.It assumes that fixed costs (FC) are constant

It assumes average variable costs are constant perunit of output, at least in the range of likely quantitiesof sales. (i.e. linearity)It assumes that the quantity of goods produced isequal to the quantity of goods sold (i.e., there is nochange in the quantity of goods held in inventory atthe beginning of the period and the quantity of goodsheld in inventory at the end of the period).In multi-product companies, it assumes that therelative proportions of each product sold andproduced are constant (i.e., the sales mix is constant).

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profit maximization is the (short run) process bywhich a firm determines the price and output levelthat returns the greatest profit. There are several

approaches to this problem. The total revenue

total cost method relies on the fact that profitequals revenue minus cost, and the marginalrevenuemarginal cost method is based on the factthat total profit in a perfectly competitive marketreaches its maximum point where marginalrevenue equals marginal cost

http://en.wikipedia.org/wiki/Short_runhttp://en.wikipedia.org/wiki/Pricehttp://en.wikipedia.org/w/index.php?title=Input_(economics)&action=edit&redlink=1http://en.wikipedia.org/wiki/Profit_(economics)http://en.wikipedia.org/wiki/Marginal_revenuehttp://en.wikipedia.org/wiki/Marginal_revenuehttp://en.wikipedia.org/wiki/Marginal_costhttp://en.wikipedia.org/wiki/Perfectly_competitivehttp://en.wikipedia.org/wiki/Perfectly_competitivehttp://en.wikipedia.org/wiki/Marginal_costhttp://en.wikipedia.org/wiki/Marginal_revenuehttp://en.wikipedia.org/wiki/Marginal_revenuehttp://en.wikipedia.org/wiki/Profit_(economics)http://en.wikipedia.org/w/index.php?title=Input_(economics)&action=edit&redlink=1http://en.wikipedia.org/wiki/Pricehttp://en.wikipedia.org/wiki/Short_run

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Sales maximisation is another possible goal and occurs when the

firm sells as much as possible without making a loss.Not-for-profit organisations may choose to operate at this level

of output, as may profit making firms faced with certainsituations, or employing certain strategies. An example of this

would be predatory pricing where, so long as costs are covered, a

firm may reduce price to drive rivals out of the market.

http://economicsonline.co.uk/Business_economics/Motives.htmlhttp://economicsonline.co.uk/Business_economics/Motives.html

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Sales maximisation meansachieving the highest possible

sales volume, without making aloss. To the right of Q, the firm

will make a loss, and to the leftof Q sales are not maximised.

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