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Classification of cost,CVPAnalysis and BEP
Paper name – Economics for Engineers
Paper code – HS-HU601
Student Name – Anal Bhandari
University Roll - 13000320114
Department - ECE
27-01-2023
MAKAUT CA1 < HS-HU601 > 2
Content:
 Cost Classification
 Types of cost classification
 Basis of cost classification
 CVPAnalysis
 BEPAnalysis
 Example of CVPAnalysis
27-01-2023
MAKAUT CA1 <HS-HU601> 3
Introduction:
What is Cost Classification?
 Cost Classification is the process of segregating the
company’s costs into different categories that gives a
fair idea to the decision-maker about the spending
pattern. This bifurcation allows teams to efficiently use
the data for accounting purposes and financial
modeling, leading the management to decide which
cost is more important than others.
Types of Cost Classification:-
Basis of Cost Classification:-
27-01-2023
MAKAUT CA1 <HS-HU601> 4
What Is Cost-Volume-Profit (CVP)
Analysis?
Cost-volume-profit (CVP) analysis is a method of cost accounting that looks
at the impact that varying levels of costs and volume have on operating profit.
 Cost-volume-profit (CVP) analysis is a way to find out how changes in
variable and fixed costs affect a firm's profit.
 Companies can use CVP to see how many units they need to sell to break
even (cover all costs) or reach a certain minimum profit margin.
 CVP analysis makes several assumptions, including that the sales price,
fixed, and variable costs per unit are constant.
27-01-2023
MAKAUT CA1 <HSHU601> 5
19-07-2022
MAKAUT CA1 <HSHU601> 6
Break-Even Point (BEP) Analysis
 In a business scenario, the break-even point is a perimeter at which the total expenses
of the enterprise equals the total revenue generated.
 Reaching this point indicates that a business has overcome all the
expenses and is no more in a state of loss. Break-even point =Fixed cost/Price per
cost – Variable cost
Example of CVPAnalysis
XYZ wishes to make an annual profit of 1,00000 INR from the sale of appliances. Details of
manufacturing and annual capacity are as follows:
Production Capacity: 10,000 units Fixed Cost: 30,000 INR
Variable Cost/Unit: 30 INR Based on the above information,
let’s plug the numbers in the CVP equation: No of Units Sold x Price Per Units = No of units Sold x
Variable Cost Units + Fixed cost + Profit
10000 x P= (10000 x 30) + 30000+ 100000
10000P = (300000+30000+100000)
10000P= 430000
Price per unit= (430000/10000) = 43
Thus price per unit comes out to 43 INR, which implies that XYZ will have to price its product at 43
INR and need to sell 10,000 units to achieve its targeted profit of 1,00000 INR.
27-01-2023
MAKAUT CA1 <HSHU601> 7
27-01-2023
MAKAUT CA1 <HSHU601> 8
Conclusion:-
Engineering economics poses numerous benefits because it
allows those in industry to make strategic decisions for their
companies. While macroeconomic and financial competencies
are key for business operations, engineering economics further
provides a mechanism for decision-making.
27-01-2023
MAKAUT CA1 <HSHU601> 9
Thank You

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MAKAUT CA1 PPT Template (5).pptx

  • 1. Classification of cost,CVPAnalysis and BEP Paper name – Economics for Engineers Paper code – HS-HU601 Student Name – Anal Bhandari University Roll - 13000320114 Department - ECE
  • 2. 27-01-2023 MAKAUT CA1 < HS-HU601 > 2 Content:  Cost Classification  Types of cost classification  Basis of cost classification  CVPAnalysis  BEPAnalysis  Example of CVPAnalysis
  • 3. 27-01-2023 MAKAUT CA1 <HS-HU601> 3 Introduction: What is Cost Classification?  Cost Classification is the process of segregating the company’s costs into different categories that gives a fair idea to the decision-maker about the spending pattern. This bifurcation allows teams to efficiently use the data for accounting purposes and financial modeling, leading the management to decide which cost is more important than others.
  • 4. Types of Cost Classification:- Basis of Cost Classification:- 27-01-2023 MAKAUT CA1 <HS-HU601> 4
  • 5. What Is Cost-Volume-Profit (CVP) Analysis? Cost-volume-profit (CVP) analysis is a method of cost accounting that looks at the impact that varying levels of costs and volume have on operating profit.  Cost-volume-profit (CVP) analysis is a way to find out how changes in variable and fixed costs affect a firm's profit.  Companies can use CVP to see how many units they need to sell to break even (cover all costs) or reach a certain minimum profit margin.  CVP analysis makes several assumptions, including that the sales price, fixed, and variable costs per unit are constant. 27-01-2023 MAKAUT CA1 <HSHU601> 5
  • 6. 19-07-2022 MAKAUT CA1 <HSHU601> 6 Break-Even Point (BEP) Analysis  In a business scenario, the break-even point is a perimeter at which the total expenses of the enterprise equals the total revenue generated.  Reaching this point indicates that a business has overcome all the expenses and is no more in a state of loss. Break-even point =Fixed cost/Price per cost – Variable cost
  • 7. Example of CVPAnalysis XYZ wishes to make an annual profit of 1,00000 INR from the sale of appliances. Details of manufacturing and annual capacity are as follows: Production Capacity: 10,000 units Fixed Cost: 30,000 INR Variable Cost/Unit: 30 INR Based on the above information, let’s plug the numbers in the CVP equation: No of Units Sold x Price Per Units = No of units Sold x Variable Cost Units + Fixed cost + Profit 10000 x P= (10000 x 30) + 30000+ 100000 10000P = (300000+30000+100000) 10000P= 430000 Price per unit= (430000/10000) = 43 Thus price per unit comes out to 43 INR, which implies that XYZ will have to price its product at 43 INR and need to sell 10,000 units to achieve its targeted profit of 1,00000 INR. 27-01-2023 MAKAUT CA1 <HSHU601> 7
  • 8. 27-01-2023 MAKAUT CA1 <HSHU601> 8 Conclusion:- Engineering economics poses numerous benefits because it allows those in industry to make strategic decisions for their companies. While macroeconomic and financial competencies are key for business operations, engineering economics further provides a mechanism for decision-making.