BREAKEVEN GRAPHIC IN CRISIS BUSINESS CONDITIONS

B is earned. But, here it has been detected deviation from plan. Namely, planned profit for
this group of products was 3.500.000,00 RSD, and earned one was smaller for 392.787,61
RSD. This is significant deviation, and here was detected first problematical point in business.
Group of products C – Third group has the smallest share in total production and it is 0,16%.
This is a group of products that has been developed as a supplement to group B, with similar
variable costs of production. Problem is in relatively low selling price and small volume of
production. Also, here it is significant to find out possibilities for improvement in this group
with higher capacity utilization or change in products for better positioning on the market.
Also, possible solution is to exclude this group from production mix, and redirect resources.
Group of products D – Fourth group has 11,28% share in total amount of production. This
group is profitable, like A and B, but here it has also been detected deviation from planned
profit. Decrease is about 20.825 RSD from plan. If we have in focus problems on the market
and effects of crisis, this deviation is not very problematic, and it can be solved with small
changes in corrections of plan, better settings of standards for work, etc.
Group of products E – Fifth group has the biggest loss. This group takes 7,15% share of total
production and enterprise should produce much more that is already producing in this group
to cover fixed costs. As CVP analysis showed that contribution margin exists, management
can take few steps to redefine business plan in this area. For example, one choice is to redirect
resources from group C to group E, because of higher contribution margin per unit (for group
C it is 7,5 RSD/kg and for group E it is 13,05 RSD/kg). If management decide to make this
kind of changes, probable solution is higher utilization of capacity in E group of products,
higher contribution margin, with cost reduction (variable costs – and fixed costs of
production), energy saving or better working standards.
Third part of analysis conducted to enterprise is calculation of safety rates, for all three
factors that indicates changes in business activities. For each group of products analysis has
showed for how many the selling prices and the volumes of production can be reduced, and
for how much can the total cost of production be increased.
Selling prices can be reduced for 6,33% for first group of products, which means that even if
selling price reduces to 200,17 RSD, the enterprise will still be at breakeven point with
revenue of 250.018.219 RSD, which is enough revenue to cover all costs of production (fixed
and variable). Also, enterprise can afford lowering the volume of production for 43,36%.
Namely, if enterprise lowers capacity usage for 43,36% for group of products A, it will be
produced only 707.496 kg of products, which is calculated as BEPu for group A. The rate of
safety for costs showed that costs can be increased for 6,76%, which means that even if costs
reach 266.913.437,00 RSD, the enterprise will still be in BEP point and it could be able to
cover all costs of production. For group B and D rates are similar, selling prices and volumes
of production have their maximum of decrease. When observe groups C and E, it is obvious
that, as they bring losses to the enterprise, these rates are with different sign. Namely, rates of
safety for selling prices and volumes of production are positive, which means that prices and
volumes cannot be reduced – it have to grow for positive percentage. For example, if safety
rate for group C is +13,04%, it is means that selling price of this group should raise to 88,17
RSD and that the price of this group of product will be able to earn enough revenue to be at
breakeven point. For volume of production, is the same, if enterprise decide to enlarge
production in group C, for safety rate of +135,64%, it means that the volume will be 8.672 kg
of products, and at that volume it will be achieved breakeven point. In contrary to positive