Wednesday, January 20, 2010

Break-Even Analysis and Target Profit Pricing:
Another cost-oriented pricing approach is break-even or a variation called target profit pricing. The firm tries to determine the price at which it will break even or make the target profit it is seeking. this is the point when the compney has no profit and no loss. In other words , we can say that it is the equillibrium point. Managers must have focus this point for a profitable business
Break-Even Volume: Fixed cost /selling price- variable cost. If a company has fixed cost of Rs 30,000 and Variable cost Rs 10 and selling price per unit is Rs 20, then its Break-Even Volume is= Rs 30,000/Rs 20-Rs 10= Rs 30,000.

posted by Abd ur Rehman

The company’s sales must be above Break-even sales to earn a profit.