The act or an instance of laying out.

2. An arrangement or a plan, especially the schematic arrangement of parts or areas: the layout
of a factory; the layout of a printed circuit.
3. Printing
a. The art or process of arranging printed or graphic matter on a page.
b. The overall design of a page, spread, or book, including elements such as page and type size,
typeface, and the arrangement of titles and page numbers.
c. A page or set of pages marked to indicate this design.
4. Sports The straight position, as in diving.
5. Informal An establishment or property, especially a large residence or estate: "[Her] show
horses . . . were kept on the couple's one-and-a-half acre Malibu layout" (People).

Processes and methods employed in transformation of tangible inputs (raw materials, semi-finished
goods, or subassemblies) and intangible inputs (ideas, information, know how) into goods or services.

Read more:
http://www.businessdictionary.com/definition/production.html#ixzz0zlGJyXJv

Includes all steps necessary to convert raw materials, components, or parts into finished goods that
meet a customer's expectations or specifications. Manufacturing commonly employs a man-machine
setup with division of labor in a large scale production.

Read more:
http://www.businessdictionary.com/definition/manufacturing.html#ixzz0zlGvVRKx

Realization of a concept or idea into a configuration, drawing, model, mould, pattern, plan or
specification (on which the actual or commercial production of an item is based) and which helps
achieve the item's designated objective(s).design

Read more: http://www.businessdictionary.com/definition/design.html#ixzz0zlHSRVGV

Statistical method of obtaining representative data or observations from a group (lot, batch,
population, or universe).

Read more: http://www.businessdictionary.com/definition/sampling.html#ixzz0zlHj5ze5

The main advantages of break even point analysis is that it explains the
relationship between cost, production, volume and returns. It can be extended to
show how changes in fixed cost, variable cost, commodity prices, revenues will effect
profit levels and break even points. Break even analysis is most useful when used
with partial budgeting, capital budgeting techniques. The major benefits to use
break even analysis is that it indicates the lowest amount of business activity
necessary to prevent losses.

Definition of Break Even point:

Break even point is the level of sales at which profit is zero. According to this
definition, at break even point sales are equal to fixed cost plus variable cost. This
concept is further explained by the the following equation:

[Break even sales = fixed cost + variable cost]

The break even point can be calculated using either the equation method or
contribution margin method. These two methods are equivalent.

Equation Method:
The equation method centers on the contribution approach to the income
statement. The format of this statement can be expressed in equation form as
follows:

[Profit = (Sales − Variable expenses) − Fixed expenses]

Rearranging this equation slightly yields the following equation, which is widely used
in cost volume profit (CVP) analysis:

[Sales = Variable expenses + Fixed expenses + Profit]

According to the definition of break even point, break even point is the level of sales
where profits are zero. Therefore the break even point can be computed by finding
that point where sales just equal the total of the variable expenses plus fixed
expenses and profit is zero.

Example:
For example we can use the following data to calculate break even point.

• Sales price per unit = $250

• variable cost per unit = $150
• Total fixed expenses = $35,000

Calculate break even point

Calculation:
 Sales = Variable expenses + Fixed expenses + Profit

$250Q* = $150Q* + $35,000 + $0**

$100Q = $35000

Q = $35,000 /$100

Q = 350 Units

Q* = Number (Quantity) of units sold.

**The break even point can be computed by finding that point where profit is zero

The break even point in sales dollars can be computed by multiplying the break even
level of unit sales by the selling price per unit.

350 Units × $250 Per unit = $87,500

Contribution Margin Method:

The contribution margin method is actually just a short cut conversion of the
equation method already described. The approach centers on the idea discussed
earlier that each unit sold provides a certain amount of contribution margin that goes
toward covering fixed cost. To find out how many units must be sold to break even,
divide the total fixed cost by the unit contribution margin.

Break even point in units = Fixed expenses / Unit contribution margin

$35,000 / $100* per unit

350 Units

*S250 (Sales) − $150 (Variable exp.)

A variation of this method uses the Contribution Margin ratio (CM ratio) instead of
the unit contribution margin. The result is the break even in total sales dollars
rather than in total units sold.

Break even point in total sales dollars = Fixed expenses / CM ratio

$35,000 / 0.40

= $87,500

This approach is particularly suitable in situations where a company has multiple

products lines and wishes to compute a single break even point for the company as a
whole.

The following formula is also used to calculate break even point

 Break Even Sales in Dollars = [Fixed Cost / 1 – (Variable Cost / Sales)]

This formula can produce the same answer:

Break Even Point = [$35,000 / 1 – (150 / 250)]

= $35,000 / 1 – 0.6

= $35,000 / 0.4

= $87,500

Benefits / Advantages of Break Even Analysis:

The main advantages of break even point analysis is that it explains the
relationship between cost, production, volume and returns. It can be extended to
show how changes in fixed cost, variable cost, commodity prices, revenues will effect
profit levels and break even points. Break even analysis is most useful when used
with partial budgeting, capital budgeting techniques. The major benefits to use
break even analysis is that it indicates the lowest amount of business activity
necessary to prevent losses.

Assumption of Break Even Point:

The Break-even Analysis depends on three key assumptions:

1. Average per-unit sales price (per-unit revenue):

This is the price that you receive per unit of sales. Take into account sales
discounts and special offers. Get this number from your Sales Forecast. For
non-unit based businesses, make the per-unit revenue $1 and enter your
costs as a percent of a dollar. The most common questions about this input
relate to averaging many different products into a single estimate. The
analysis requires a single number, and if you build your Sales Forecast first,
then you will have this number. You are not alone in this, the vast majority of
businesses sell more than one item, and have to average for their Break-even
Analysis.

2. Average per-unit cost:

This is the incremental cost, or variable cost, of each unit of sales. If you buy
goods for resale, this is what you paid, on average, for the goods you sell. If
you sell a service, this is what it costs you, per dollar of revenue or unit of
service delivered, to deliver that service. If you are using a Units-Based Sales
Forecast table (for manufacturing and mixed business types), you can project
unit costs from the Sales Forecast table. If you are using the basic Sales
Forecast table for retail, service and distribution businesses, use a percentage
estimate, e.g., a retail store running a 50% margin would have a per-unit
cost of .5, and a per-unit revenue of 1.
 3. Monthly fixed costs:
Technically, a break-even analysis defines fixed costs as costs that would
continue even if you went broke. Instead, we recommend that you use your
regular running fixed costs, including payroll and normal expenses (total
monthly Operating Expenses). This will give you a better insight on financial
realities. If averaging and estimating is difficult, use your Profit and Loss table
to calculate a working fixed cost estimate—it will be a rough estimate, but it
will provide a useful input for a conservative Break-even Analysis.

Limitations of Break Even Analysis:

It is best suited to the analysis of one product at a time. It may be difficult to classify
a cost as all variable or all fixed; and there may be a tendency to continue to use a
break even analysis after the cost and income functions have changed.

Review Problem:
Voltar Company manufactures and sells a telephone answering machine. The
company's contribution format income statement for the most recent year is given
below:

Percent of
Total Per unit
sales
Sales $1,200,000 $60 100%
Less variable expenses 900,000 45 ?%
-------- -------- --------
Contribution margin 300,000 15 ?%
Less fixed expenses 240,000 ====== ======
--------
Net operating income $60,000
======

Calculate break even point both in units and sales dollars. Use the equation method.

Solution:
Sales = Variable expenses + Fixed expenses +Profit

$60Q = $45Q + $240,000 + $0

$15Q = $240,000

Q = $240,000 / 15 per unit

Q = 16,000 units; or at $60 per unit, $960,000

Alternative solution:
 X = 0.75X + 240,000 + $0

0.25X = $240,000

X = $240,000 / 0.25

X = $960,000; or at $60 per unit, 16,000 units

Break Even analysis Calculator:

Click here to Launch Break Even Analysis Calculator [This is external link]

Advantages

Quick and simple

Disadvantages

It is only a forecast!

Easy to understand

Assumes all products are

made AND sold

Costs may change

Helps spot potential

problems

Can assist when applying

for a loan

Not very good for

services because prices
vary enormously

Mukesh Ambani owned Reliance Industries has bought 95% stake in Infotel
Broadband for Rs 4,800 crore. Infotel Broadband will now be a subsidary of Reliance
Industries. Shares of RIL have been buzzing of late on rumours of foray in the telecom
sector.

Unlisted Infotel Broadband Services is the only firm to win broadband spectrum in all 22
zones in India in an auction that ended on Friday. The firm is paying Rs 12,848 crore
($2.7 billion) for the spectrum, the government said. Announcement of the deal came
 within hours of Infotel emerging as the sole winner
of broadband spectrum for the entire country.
Reliance would pay this fee, a source direct
knowledge of the matter told Reuters on Friday.

This marks Mukesh Ambani group’s entry into

telecom sector in less than a month of he and his
younger brother Anil reaching a truce by ending
all the no-compete agreements to enable each
other an opportunity to enter and invest in areas hitherto barred under the family
settlement reached in 2005 for division of Reliance empire.

RIL will invest Rs 4,800 crore by way of subscription to fresh equity capital at par to be
issued by Infotel Broadband, the company said in a statement.

The share prices of both HFCL (promoted by Mahendra Nahata) and HFCL Infotel
(promoted by son Anant Nahata) today rose by the maximum limit and closed at Rs 11.39
and Rs 10.14 a share respectively. RIL’s shares also surged over three per cent to close at
Rs 1,046.25 a share.

Commenting on the initiative, RIL Chairman and Managing Director Mukesh Ambani
said, “We see this as the next wave of value creation opportunity in the wireless
broadband space. We believe this will pole-vault India’s economy into the digital world
at an accelerated pace while creating next generation tools that will enhance productivity
and create world-class consumer experiences.”

RIL said that BWA services can provide an opportunity to be in the forefront among the
countries providing world-class 4G networks and services.

“A single 20 MHz spectrum when used with Long Term Evolution (generally known for
4G technology) has the potential of providing greater capacity when compared to existing
communication infrastructure in the country,” the company said.

In the BWA space, no other player could bag pan-India spectrum. Bharti Airtel and US-
based Qualcom won four circles each, while Aircel bagged spectrum in eight circles.

There are reports that RIL was also talking to a new telecom licencee, Videocon
Mobile, for a possible stake in the company. Videocon’s share also went up by 0.40 per
cent to close at Rs 22.20 a share.

It was reported in The Economic Times that Mahendra Nahata-owned Himachal

Futuristic’s arm, Infotel Broadband Services, could be a candidate for acquisition by RIL.

The government today raised over Rs 38,300 crore as the 16-day long auction for
Broadband Wireless Access (BWA) spectrum came to an end.
As many as 11 companies, including Bharti Airtel, Reliance, Idea Cellular, Aircel,
Vodafone and Tata Communications Internet Services, participated in the auction for
Broadband Wireless Access spectrum.

BWA spectrum enables high-speed Internet access as well as Internet telephony and TV
services. It can also be used for voice and high-speed data services.

When the brothers split up the family empire in 2005, Anil Ambani gained control of
No. 2 Indian telecoms firm Reliance Communications, and his brother was widely
expected to return to the industry. While third-generation (3G) spectrum allows high-
speed Internet access and data transfer on mobile phones, broadband spectrum would
enable firms to provide high-speed wireless data links with better coverage than fixed-
line broadband — key for Internet penetration in India’s rural hinterlands, which have
poor last-mile fibre connectivity.

Reliance has been working hard break into new markets and broaden its various
businesses including refining, oil and gas exploration and petrochemicals, as well as
expand its presence outside India. The company, which owns the world’s largest refining
complex and operates India’s largest gas find, is in talks to buy a stake in the shale gas
assets of US-based Pioneer Natural Resources, two sources familiar with the matter said
on Thursday. In April, Reliance bought a 40 percent stake in the Marcellus Shale
operations of Atlas Energy for $1.7 billion, to form a joint venture at one of the most
promising natural gas deposit regions in the United States