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# Mgt 201 GDB no 2 closing date Friday, July 31, 2015

Learning Objective

Improve conceptual understanding of Break-even point.

Question

In a competitive environment, where a producer cannot increase selling price of a product, how can he break-even the business operations? Give suggestions.

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### Replies to This Discussion

Start the discussion fellows..........

Please explain Break-even point

Break-Even-Point ( BEP)

Break-even is the point of zero loss or profit. At break-even point, the revenues of the business are equal its total costs and its contribution margin equals its total fixed costs. Break-even point can be calculated by equation method, contribution method or graphical method. The equation method is based on the cost volume profit ( cvp) formula:-

px=vx + FC + profit
• Where,
• p is the price per unit,
• x is the number of units,
• v is variable cost per unit and
• FC is total fixed cost.

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### Socially undesirable aspects compared to perfect competition

• Selling costs: Products under monopolistic competition are spending huge amounts on advertising and publicity. Much of this expenditure is wasteful from the social point of view. The producer can reduce the price of the product instead of spending on publicity.
• Excess Capacity: Under Imperfect competition, the installed capacity of every firm is large, but not fully utilized. Total output is, therefore, less than the output which is socially desirable. Since production capacity is not fully utilized, the resources lie idle. Therefore, the production under monopolistic competition is below the full capacity level.
• Unemployment: Idle capacity under monopolistic competition expenditure leads to unemployment. In particular, unemployment of workers leads to poverty and misery in the society. If idle capacity is fully used, the problem of unemployment can be solved to some extent.
• Cross Transport: Under monopolistic competition expenditure is incurred on cross transportation. If the goods are sold locally, wasteful expenditure on cross transport could be avoided.
• Lack of Specialization: Under monopolistic competition, there is little scope for specialization or standardization. Product differentiation practiced under this competition leads to wasteful expenditure. It is argued that instead of producing too many similar products, only a few standardized products may be produced. This would ensure better allocation of resources and would promote economic welfare of the society.
• Inefficiency: Under perfect competition, an inefficient firm is thrown out of the industry. But under monopolistic competition inefficient firms continue to survive.

break-even the business operations ka kya mtlb hu

Break-even is the point of zero loss or profit. At break-even point, the revenues of the business are equal its total costs and its contribution margin equals its total fixed costs.

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