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Financial Management (MBA 511E) Assignment # 1: Nowsheen Noor ID # 1921251

This document contains an assignment submission for an MBA course on financial management. It includes: 1) A break even analysis calculating that the break even point is 1000 units sold at a fixed cost of BDT 6,000,000, variable cost of BDT 4,000 per tube, and selling price of BDT 10,000 per tube. 2) A calculation that a 10% increase over the break even point of 1000 units is BDT 1,100,000. 3) A calculation that with a new variable cost of BDT 3,600 per tube, the new break even point is 93 units for BDT 930,000. 4) An analysis of whether a company

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48 views3 pages

Financial Management (MBA 511E) Assignment # 1: Nowsheen Noor ID # 1921251

This document contains an assignment submission for an MBA course on financial management. It includes: 1) A break even analysis calculating that the break even point is 1000 units sold at a fixed cost of BDT 6,000,000, variable cost of BDT 4,000 per tube, and selling price of BDT 10,000 per tube. 2) A calculation that a 10% increase over the break even point of 1000 units is BDT 1,100,000. 3) A calculation that with a new variable cost of BDT 3,600 per tube, the new break even point is 93 units for BDT 930,000. 4) An analysis of whether a company

Uploaded by

Nowsheen Noor
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Financial Management

(MBA 511E)

Assignment # 1

Submitted by:
Nowsheen Noor
ID # 1921251

Submitted to:
Dr. Chowdhury Saleh Ahmed
a) Break Even Analysis
A break-even analysis is a financial tool which helps you to determine at what stage your
company, or a new service or a product, will be profitable. In other words, it’s a financial
calculation for determining the number of
products or services a company should
sell to cover its costs (particularly fixed
costs). Break-even is a situation where
you are neither making money nor losing
money, but all your costs have been
covered.
Break-even analysis is useful in studying
the relation between the variable cost,
fixed cost and revenue. Generally, a
company with low fixed costs will have a
low break-even point of sale.

b)
Fixed Cost = BDT 6000000
Variable Cost = 4000 per tube
Selling Price = 10000 per tube
BEP (Qty) = Fixed Cost/(Price-Variable Cost)
= 6000000/(10000-4000)
= 1000 units (Ans)

c)
BEP (Qty) = 1000 units
So,
BEP (BDT) = 1000x10000
= BDT 100000
So,
10% over BEP= 100000+110%
=BDT 110000 (Ans)
d)
Given,
New VC per tube = 4000-90%
= 3600
New BEP (Qty) = Fixed Cost/(Price-Variable Cost)
= 600000/(10000-3600)
= 93 units
BEP (BDT) = 93x10000
= BDT 930000 (Ans)

e) If the company buys and sells at break-even point, then the company will neither make any
profit, nor any loss.

f) If a seller is running at a market where other sellers cannot influence the price ruling in the
market, then it can be of less risk even if the price is kept higher. That way, the company will
be able to make more profit. So, the company should not sell at break-even price.

g)
BEP (in BDT) = 2,000
Ruling price = 3,000
Factory capacity = 8,000
BEP (output) = 3,000
Total market demand =33,000

Yes, the company will be able to sell all his output at the market price.

The company can start making profit after exceeding the BEP output, which is 3000 units,
because any production after BEP output will be profit for the company.

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