January 10th, 2018
BREAKEVEN ANALYSIS AND PRODUCT DECISIONS – A Report to BSN Limited Finance Director
This report aims to explain the process of breakeven analysis and evaluate three products to provide information on the appropriate course of action for BSN Limited. Breakeven analysis is an important aspect in management decisions since it provides a guide on the level of activity required for the entity to enter into profitability. The report in the first section provides an explanation of various aspects of breakeven analysis such as cost behaviour, margin of safety and the limitations of breakeven analysis.
In the second, third, and fourth part, the report evaluates three products – A, B and C – to find out the one that the company should produce under different conditions. From the analysis product A is the most profitable for the company to produce since it brings in the highest contribution. The report also evaluates the breakeven points for these products and what product mix would be optimal for the company when direct material X is a limiting factor. Go to part 2 here.