EEM

Assignment 3
JSVL Thanmai
121910313036
Section: 3B13
EEM

1. Define BEA and BEP.

A: Break even analysis: It is the study of cost-volume
production profit (CVP) relationship.

Break even point: It is a study of the point where neither

profit or loss occurred. The point is known as the break even
point.

2. Write limitations of Break-even analysis.

A: Limitations of BEA:
1. Break-even analysis is based on the assumption that all
costs and expenses can be clearly separated into fixed
and variable components. In practice, however, it may
not be possible to achieve a clear-cut division of costs
into fixed and variable types.
2. It assumes that fixed costs remain constant at all levels
of activity. It should be noted that fixed costs tend to
vary beyond a certain level of activity.
3. It assumes that variable costs vary proportionately with
the volume of output. In practice, they move, no doubt,
in sympathy with volume of output, but not necessarily
in direct proportions..
4. The assumption that selling price remains unchanged
gives a straight revenue line which may not be true.
 Selling price of a product depends upon certain factors
like market demand and supply, competition etc., so it,
too, hardly remains constant.
5. The assumption that only one product is produced or
that product mix will remain unchanged is difficult to
find in practice.

3. List qualities of a good leader.

A:
1. Dynamic
2. Humble
3. Selfless
4. Do the right things
5. Trustworthy
6. Focus on people

4. A note on how the nature of management is an art, a

science and a profession?
A: Art is the experienced and personal utilization of subsisting
information to accomplish solicited outcomes. It can be
procured via education, research and practice. As art is
involved with the personal utilization of data some kind of
inventiveness and creativity is needed to follow the
fundamental systems acquired.
Management as a Science:
Science is an organized collection of knowledge that
emphasizes definite universal truths or the action of
comprehensive laws.
Management as a Profession:
The profession can be described as an occupation upheld by
specific education and practice, in which entry is limited.
5. Explain any two leadership theories.
A: 1. Contingency Theory:
Leadership as being more flexible – different
leadership styles used at different times
depending on the circumstance.
Depends on :
1. Type of staff
2. History of business
3. Culture of business
4. Nature of changes needed
2. Transformational Theory:
Widespread changes to a business or organization
Requires:
1. Long term strategic planning
2. Clear objectives
3. Clear vision
Leading by example – walk the walk

6. Explain BEA and BEP with graphical representation.

A: Break-even analysis is useful in studying the relation
between the variable cost, fixed cost and revenue.
It is an analysis to study the point where neither profit nor
loss is occurred. This point is known as Break Even Point.
It helps in solving the following types of problems:

1. volume of sales will be necessary to cover a reasonable

return on capital Investment.
2. Computing costs and revenues for all possible volumes
of output.
3. To find the price of an article to give the desired profit.
4. To determine the variable cost per unit.
 Break-even chart is a graphical representation of the
relationship between various costs and sales revenue at a
given time. It determines the Break Even Point.
1. It is an aid to management and it depicts a clearer view
of the status of the business.
2. It is a graphic representation of the economic position
of the business.
3. It shows the profits and losses at various output level.

7. Write significance of BEA.

A: 1. To make a feasibility before starting a new business.
2. To determine the selling price or the desired sales
mix for earning target profits.
3. To measure profits or losses for the businesses for
different output levels.
4. To calculate the lowest possible activity level
without putting the business in jeopardy.
5. To evaluate alternatives available and special
orders as a part of the decision-making process.

8. Write a short note on fixed and variable costs.

A: Fixed cost: It is assumed to be constant at all levels of
output.
These costs are normally independent of a company's specific
business activities and include things like rent, property tax,
insurance, and depreciation.

Variable costs: It varies with output. It increases with increase

in production.
Some of the most common types of variable costs include
labor, utility expenses, commissions, and raw materials.

9. Appraise any two applications of BEA with suitable

examples.
A: 1. It helps in making inter-firm comparison of profitability.
2. It helps in determination of costs and revenue at
various levels of output.
3. It is an aid in management decision-making (e.g., make
or buy, introducing a product etc.), forecasting, long-term
planning and maintaining profitability.
4. It reveals business strength and profit earning capacity
of a concern without much difficulty and effort.

10. A firm has a fixed cost of Rs 20,000; Selling price per unit
is 10 and variable cost is Rs 6 Determine Break-even point
in terms of sales value.
A: Break-even point = 20000 / (10 – 6)
= 20000 / 4

= 5000

11. Classify definitions of management based on view`s of

various authors.
A: According to Peter F. Drucker. “A Multipurpose organ that
manages a business and manages managers and manages
workers and works”.
According to J. Lundy “Management is what management
does. It is the task of planning executing and controlling”.
According to Lawrence Appley “Management is the
development of people and not the direction of things”.

12. List 16 principles of management.

A: 1. Principle of objective
2. Principle of specialization
3. Principle of coordination
4. Principle of authority and responsibility
5. Principle of balance
6. Principle of continuity
7. Principle of uniformity
8. Principle of unity of command
9. Principle of exception
10. Principle of simplicity
11. Principle of efficiency
12. Principle of span of control

13. Enlighten 12 principles of leadership.

A: Principles of leadership:
1. Show interest / develop relations
2. Positive approach
3. Complaints
4. Promises
5. Get the facts
6. Discussion basis
7. Design an approach
8. Admit mistakes
9. Reasonable expectations
 10. Be prompt
11. Compliment
12. Prepare for change.
14. What do you understand about leadership style? Describe
the different styles of leadership.
A: Leadership styles are classifications of how a person
behaves while leading a group.
There are 4 types of leadership styles:
1. Autocratic: leader make decisions without reference to
anyone.
2. Democratic: encourages decision making from different
perspectives.
3. Laissez faire / free rein: leadership responsibilities are
shared to all.
4. Paternalistic: leader acts as father figure. Leader makes
decision but may consult.

15. Discuss about the advantages and disadvantages of

management by objectives.
A: Advantages of Management by Objectives:
1. Since Management by objectives (MBO) is a
result-oriented process and focuses on setting and
controlling goals, if encourages managers to do
detailed planning.
2. Both the manager and the subordinates know what is
expected of them and hence there is no role ambiguity
or confusion.
3. The managers are required to establish measurable
targets and standards of performance and priorities for
these targets. In addition, the responsibilities and
authority of the personnel is clearly established.
Disadvantages of Management by Objectives:
 1. MBO can only succeed if it has the complete support of
the top management.
2. Management by Objectives (MBO) may be resented by
subordinates. They may be under pressure to get along
with the management when setting goals and
objectives and these goals may be set unrealistically
high. This may lower their morale and they may become
suspicious about the philosophy behind MBO.
3. They may seriously believe that MBO is just another of
the management’s ploys to make the subordinates
work harder and become more dedicated and involved.
The emphasis in the MBO system is on quantifying the
goals and objectives. It does not leave any ground for
subjective goals. Some areas are difficult to quantify
and even more difficult to evaluate.

16. Explain the management as a process. What are the

various elements of the process?
A: A management process is a well-defined system of setting
goals, planning and controlling any action’s execution.

Planning: Planning is the first and foremost function of the

management process. It is the thinking process to
determine the proposed course of action, what, how,
when, where and who has to perform the work or things to
be done.
Organization: Organization as a process institutes the
harmonious co-adjustment between the different factors
of production as land, labor, capital of the business
enterprise, so that ultimate goal is achieved.
Staffing: Staffing is the process of deciding the number
and quality of manpower needed by an organization. To
achieve its objectives efficiently recruiting, selecting,
 training, developing and appraising the newly recruited as
well as the existing staff is the main focus of the unit. It
can be seen as the function of ‘Human Resource Manager’
but at a very smaller level.
Directing: Directing is primarily concerned with supervision,
regulation, inspiration, inspection and guidance of the
activities of the employees in such a manner so as to
achieve the predetermined goals of the organization
smoothly.
Control: Control is that process which keeps the whole
system in check so that it moves as per the pre
designated parameters or verifying the total movement of
the business enterprise as per the plan and adopting
corrective measures thereon for any deviation

17. From the following figures you are required to calculate,

considering sales Rs.4000, variable cost Rs.2000, fixed
cost Rs.1600: i.P/V Ratio ii.Break-Even Volume iii.Margin of
Safety iv. Profit.
A: P/V ratio:
p/v = 𝑻𝒐𝒕𝒂𝒍 𝑺𝒂𝒍𝒆𝒔−𝑻𝒐𝒕𝒂𝒍 𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑪𝒐𝒔𝒕/ 𝑻𝒐𝒕𝒂𝒍 𝑺𝒂𝒍𝒆𝒔 𝑿 𝟏𝟎𝟎= 𝑺−𝑽 /
𝑺 𝑿 𝟏𝟎𝟎
= (4000-2000/4000) * 100
= (2000/4000) * 100
= 50%
Break-Even volume:
Break Even Sales= (FC*Sales)/(Sales-VC)
= (1600*4000)/ (4000-2000)
= 3200
Margin of safety:
Margin of Safety = Sales - BEP Sales
= 4000-3200
= 800
Profit:
Profit = Margin of Safety * P/V Ratio
=800*50%
=400

18. From the following information find out a) P/V Ratio b)

Sales C) Margin of Safety. Fixed cost = Rs 40,000, Profit = Rs
20,000, BEP = Rs 80,000
A: P/V Ratio:
We know that,
S – V = F + P OR S (S – V)/S = F + P B.E.S. x P/V Ratio = F
(Value of P is zero at BE Sales) OR
P/V Ratio = F/BES
Putting the value,
P/V Ratio = 40,000/80,000 = 50/100 OR 50%

Sales:
We know that,
Sales x P/V Ratio = F+ P OR Sales x P/V Ratio = Contribution
Sales = Contribution/ (P/V Ratio)
So, = (40,000 + 20,000)/50/100 = (60,000 x 100)/50 =Rs.1,
20,000

Margin of Safety:
Margin of Safety = Sales – B.E.P Sales So,
MOS = 1, 20,000 – 80,000 MOS = Rs.40, 000