Using breakeven analysis when cost behavior is unknown

Article Abstract:

Techniques for conducting break-even analyses are discussed. A break-even analysis determines realistic profitability levels for products (or services), and these product profitability levels are then used to identify the sales efforts required to offset all costs associated with the product. The technique identified as superior to historical data analyses, regression analyses, probabilistic models and simulation methods is described as a method for determining break-even points relative to various cost behaviors. Equations for calculating high and low break-even points are provided. Sales levels that exceed the hugh break-even point should result in profitable products, while sale levels that fail to meet low break-even points result in unprofitable products. Classification of costs involved in these break-even analysis methods is also discussed.

Profit, Profits, Break-even analysis

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Cost account directive: an effective management tool

Article Abstract:

General Dynamics Corp. uses a management control system called a Cost Account Directive (CAD) to control all jobs, budgets, and schedules. The CAD contains a task description and a manpower spreadsheet. The task description gives both a general and detailed analysis of the job to be performed. The constituent parts of the project, delivery dates, materials, and budget requirements are also included. The spreadsheet is used to spread the project's work fairly and efficiently among employees. The directive is not only a useful method of motivating and monitoring employees, it is also a good way to improve job estimation procedures.

Industrial project management, Project management, Case studies, Economic aspects, Scheduling (Management), Business budgets, General Dynamics Corp., Managerial accounting

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