Neil Patel 40068068 Unit 7 D1
D1: Evaluate the reliability of break-even analysis in estimating the budgeted
activity levels for a selected organisation.
In this assignment, I will be evaluating the reliability of break-even analysis in
estimating budgeted activity levels for a selected organisation.
Break even analysis identifies the relationship between costs and revenue as well as
identifying levels of activity that would generate a profit and levels of activity that
would create a loss.
Break even can be effective for a business but there is also a lot of things that break
even does not take into account so businesses cannot fully rely on break even.
Break even doesn’t take into account a few things such as changes in price. If the
business change their price so that it becomes lower than the break even figure is
going to increase because they are making less money on each item. However if the
price increases then it is going to mean the breakeven will be lower because they
are going to make more money quicker so the business have to make less sales.
Another thing that breakeven doesn’t even take into account is if the suppliers
change the price that they are going to charge the business, this will affect the
breakeven because it means that to meet breakeven the business are going to have
to make more sales or increase the price of their products and customers may not be
happy if the price increases. With the addition of a break even analysis there are
many benefits that can come to the business for example, one of the biggest benefits
that can come out from this analysis is the fact that you can set your pricing
accordingly.
A Break even analysis allows Tata Jewelery to know how much they need to sell to
be able to break even and start to make profit. This is less time being wasted and it's
easy to navigate and view for the business. Furthermore, there's a visual
representation of the graph and to see the changes and data being produced, and
this can allow businesses to create strategic decisions to change the data.
The main assumptions of the break even analysis for TATA jewelry is that the sales
are based on the prediction of the business and it may not have happened and these
are affected by external factors.
D1: Evaluate the reliability of break-even analysis in estimating the budgeted
activity levels for a selected organisation.
In this assignment, I will be evaluating the reliability of break-even analysis in
estimating budgeted activity levels for a selected organisation.
Break even analysis identifies the relationship between costs and revenue as well as
identifying levels of activity that would generate a profit and levels of activity that
would create a loss.
Break even can be effective for a business but there is also a lot of things that break
even does not take into account so businesses cannot fully rely on break even.
Break even doesn’t take into account a few things such as changes in price. If the
business change their price so that it becomes lower than the break even figure is
going to increase because they are making less money on each item. However if the
price increases then it is going to mean the breakeven will be lower because they
are going to make more money quicker so the business have to make less sales.
Another thing that breakeven doesn’t even take into account is if the suppliers
change the price that they are going to charge the business, this will affect the
breakeven because it means that to meet breakeven the business are going to have
to make more sales or increase the price of their products and customers may not be
happy if the price increases. With the addition of a break even analysis there are
many benefits that can come to the business for example, one of the biggest benefits
that can come out from this analysis is the fact that you can set your pricing
accordingly.
A Break even analysis allows Tata Jewelery to know how much they need to sell to
be able to break even and start to make profit. This is less time being wasted and it's
easy to navigate and view for the business. Furthermore, there's a visual
representation of the graph and to see the changes and data being produced, and
this can allow businesses to create strategic decisions to change the data.
The main assumptions of the break even analysis for TATA jewelry is that the sales
are based on the prediction of the business and it may not have happened and these
are affected by external factors.
