Management Planning and Control

LLOVER C. YAP
MPA - OM
BREAK-EVEN ANALYSIS

Break-even analysis is the relationship between cost volume and profits at

various levels of activity, with an emphasis placed on the break-even point. This
point is where the business receives neither a profit nor a loss, when total money
received from sales is equal to total money spent to produce the items for sale.
The Home Development Mutual Fund (abbreviated as HDMF), more popularly
known as the Pag-IBIG Fund, is a Philippine government-owned and controlled
corporation under the Department of Human Settlements and Urban Development
responsible for the administration of the national savings program and affordable
shelter financing for Filipinos employed by local and foreign-based employers as well
as voluntary and self-employed members. It offers its members short-term loans and
access to housing programs. Pag-ibig Fund operates a semi-government and private
business financial institution, like banks but somewhat different in nature.
In Pag-Ibig Fund Break Even Analysis can be attributed to the cost volume
profit relationship. Pag-ibig fund is an independent Income Generating Institution or a
financial institution that continually innovates and constantly making techniques on
how to earn more profit and exceeding every year’s targets as evident by the its
overwhelming net worth that trends increasingly every year for the past 4 years.
Being the same nature as with other private banks or private institution, break-even
analysis is always used by management to help understand the relationships
between cost, sales volume and profit. This technique focuses on how selling prices,
sales volume, variable costs, fixed costs and the mix of product sold affects profit.
Understanding some of the basic tenets of Cost volume profit analysis can help the
fund analyze these factors and thus makes better business decisions.
On the other hand Break-even analysis is also used by the fund specifically in
cost accounting and capital budgeting to determine at what point a product or
business is profitable. This analysis employs mathematical models, which may be
very simple or highly complex, in order to understand the relations between the costs
of doing business and the associated revenues. The object of break-even analysis is
to learn or predict the minimum pricing and production levels at which a company will
recover its costs and begin to profit. In addition to analyzing actual production levels,
it may also be applied to production-related variables such as the break-even point
for a given production capacity.