Study Material on Expenditure (English & Hindi), Books & Budget (English & Hindi), GRP Part 1 (English & Hindi), GRP Part 2 (English) and Management Accounting (English)

Study Material Index 

By Nageswara Rao M, 9492432160

 

English Medium
Subject	No of pages	No of Topics	No of MCQs
GRP Part One	165	68
GRP Part Two	277	33	289
Books & Budget	126	42
Expenditure	240	80	139
Management Accounting	113	42
Total	921	265	428

 

अध्ययन सामग्री सूचकांक

 

हिंदी माध्यम
विषय	पृष्ठों की संख्या	विषयों की संख्या	एमसीक्यू की संख्या
जीआरपी भाग एक	157	68
जीआरपी भाग दो	कुछ ही देर में
बुक और बजट अध्ययन सामग्री	125	42
व्यय अध्ययन सामग्री - अक्टूबर, 2021	245	78	139
Total	527	188	139

 Coming soon:

1. Differences between Questions & Answers

2. Advanced Bookkeeping

3. Traffic Accounts 

4. Workshop Accounts

5. Stores Accounts

6. The study material for LDCE of Departments (other than Accounts)

7. GRP Part Two (Hindi Medium)

Click for Details of Study Material Index

Fixed Cost and its importance in BEP

Fixed Cost & its importance in BEP

• Meaning of Fixed Cost :  A cost does not change with an increase or decrease in the Goods produced.

• In General, companies can have two types of costs, i.e., Fixed Costs and Variable Costs.

• Also called as Indirect cost or Overhead costs.

• Examples:  Lease Rentals, Salaries, Insurance, Taxes, Interest expense, Depreciation etc. 

• All Sunk costs are Fixed Costs.  But, all fixed costs are not sunk costs. 

• Sunk cost: Money that has already been spent and which cannot be recovered.  Examples are Machinery Cost, Lease expense, etc.

• A fixed cost per unit is always variable; Whereas Variable cost per unit is always fixed.

• Segregation of Total Costs into fixed Costs and Variable costs helps the Management to decide the scale of Production and Breakeven analysis.  

• Example: A company Produces Pens.  Their fixed costs are Rs. 10000 and Variable costs are Rs. 10 per Pen. Selling price per pen is Rs. 120.  Find the Total cost for 100 Pens and 200 Pens and Profit on two options. 

100 Units

Costs	No of Pens	Rate per Unit	Total
Fixed	100	100	10000
Variable Costs	100	10	1000
Total costs	100	110	11000
Selling Price	100	120	12000
Profit	100	10	1000

200 Units:

Costs	No of Pens	Rate per Unit
Fixed	200	50	10000
Variable Costs	200	10	2000
Total	200	60	12000
Selling price	200	120	24000
Profit	200	60	12000

• From the above, the Fixed Cost per Unit is changed from Rs. 100 to Rs.50 when Production was increased from 100 units to 200 Units.  Whereas, Variable cost remained fixed though production was increased from 100 units to 200 units. 

So, when change in the Production:

• Fixed cost per unit is variable  (though Total Fixed cost is fixed)

• Variable cost per unit is fixed. (though Total Variable cost is variable)

• The segregation of Total costs into Fixed Costs and Variable costs helps the firms to analyze the breakeven analysis. (Where there is no profit, no loss) and increase their profit capacity.

BEP –Break Even Point = Fixed Costs / Sales Price per Unit – Variable Cost per unit 

• In the above example 100 units production level, BEP is 10000/120 – 10 = 91 Units.   

• That means at the point of 91 units, there is no profit or no loss.

At 91 units

Costs	No of Pens	Rate per Unit
Fixed	91	109.90	10000
Variable Costs	91	10	910
Total	91	119.90	10911
Selling price	91	120	10920
Profit	91	0.10	9

Profit Rs.9 is almost negligible.  Hence at the production of 91 units, there is no profit, and there is no loss.   So Break Even Point (BEP) is 91 units 

Key Points for MCQ 

1. BEP stands for Break Even Point 

 

2. Fixed cost - other names are Overhead cost or Indirect Cost 

 

3. All Sunk costs are Fixed Costs.  But, all fixed costs are not sunk costs. 

 

4. Sunk cost: Money that has already been spent and which cannot be recovered.  Examples are Machinery Cost, Lease expense, etc.

 

5. A fixed cost per unit is always variable; 

6. Whereas Variable cost per unit is always fixed. 

 

7. BEP formula = Fixed Costs / Sales Price per Unit – Variable Cost per unit

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