Question

This week has focused on using several cost analysis tools to determine how well products contribute to a company’s profitability. However, all of these tools are internally used and not required to be published outside of an organization. Instead, external stakeholders rely on the three key financial statements reviewed in Unit 1:

• Income Statement
• Balance Sheet
• Statement of Cash Flows)

If a company’s CVP analyses showed it was not operating at break-even, where on the financial statements might one be able to see this impact (i.e., specific line items on the statements)?

kindly provide a different answer, most of the answers here are same.

" when the company failed to beak even, that's mean it is not able to cover its fixed assets and the profit would be negative. So it loss"

This is the only thing that I understand.

please provide a detailed information.

Regards,

Answer 1

The break even analysis which is a part of CVP analysis has to be extracted from the Income Statement & the costing books like cost sheet.

Break even point in units = Fixed costs/(sp-vc)

Break even sales in dollars = BEP in units * Selling price

The Fixed costs information, Selling price * variable costs information can be extracted from the income statement, if only the income statement is prepared using Absorption or variable costing methods.

when the company failed to break even, that's mean it is not able to cover its fixed assets and the profit would be negative. So it results in loss.