Question

Personal examples for each (simple but well thought out examples)

Break-even point

Budget

Balanced scorecard

Capital budgeting

Answer 1

Ans. Break even point :- Break even point means a point of sales where all cost are equal to sales. means no profit no loss situation .

Formula of break even point = Fixed cost / Contriution margin per unit

                                                                        or

                                                    = Fixed cost / PV ratio

Ex. SP 15

Variable cost is 10

Fixed cost 150000

Contribution margin = 5

BEP = 150000/5 = 30000units or value (30000*5)=150000

Budget:- Budget means cost estimate before starting any type of work. we can make any of work like Raw material budget, sales budget, cost budget , profit budget, sales budget mainly in organization they are making Cash budget and Flexibile budget.

Example of budget: Expected sales is 200000

Expected cost = 150000

expected budget profit is (200000-150000) = 50000

Balanced Scorecard:- Balance scorecard is a strategic planning and management system used extensively in business and organization. The benefit of the system include increasing focus on result, aligning, business activities with organization strategy and improving performance and communication.

A Balance score card proposes that the organizatiion should be viewed from four prospective.

This four prospective include:-

1. Financial

2. Customer

3. Internal business process

4. Learning and growth

Capital budgeting: - Capital budgeting is the process in which a business determine and evaluates potential large expenses or investment . These expenditures and investment include project such a building or new plant or investing in a long-term venture. often a company assesses a prospective project lifetime cash inflow and outflow to determine whather the potential returns generated meet a sufficient target benchmark.

Indeally businesess should pursue all the project and opportunities to enhance the shareholder value. because amount of capital available for business purpose is limited, management need to use capital budgeting techniques to determine the which project will yield the most return over an applicable period.

Example

Project A Capital investment is 500000/- and Project B is 600000, both project time is same

Return of project A 650000

Return of project B 675000

So we will select project B , due high return as compare of project A