Calculations AC_DC and Breakeven Analysis
21 Pages Posted: 12 Jul 2003 Last revised: 10 Jun 2016
Date Written: June 2, 2003
A single procedure suffices, just one and the same algorithm, both to elaborate various AC_DC calculations and to perform breakeven analysis to the fullest extent. Breakeven analysis, under the assumption 'production volume is equal to sales volume', results in one or a few breakeven points. These points however belong to a breakeven line. A general maxim exists of which classical breakeven analysis is merely one of the applications.
Total turnover of a certain good in a period is the amount of sales (sales volume) multiplied by the (proportional) selling price per unit. The eventually existing difference between sales volume and production volume is the mutation of the supply, i.e. a number of units (positive or negative) that can be multiplied either by the standard unit-cost of the finished goods in supply (in case of AC calculation) or by just the differential costs of such a unit (in case of DC calculation). The gross performance is total turnover added to the mentioned multiplication product being the mutation supply measured in money units. This performance less total costs, variable as well as fixed costs, results in the AC and respective DC profit figure at the bottom line. The calculation in fact represents a formula. One single formula that is applicable, either for calculations AC and DC or for everything imaginable with regard to breakeven analysis and profit isographs.
Keywords: Breakeven Analysis to the fullest extent, Profit Isographs, Absorption Costing, Full Costing, Direct Costing, Marginal Costing, Differential Costing, Divergent DC and AC calculation schemes have been rendered out of date by a general maxim
JEL Classification: M40, M46
Suggested Citation: Suggested Citation