BREAKEVEN GRAPHIC IN CRISIS BUSINESS CONDITIONS

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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
percentage of these two rates, in case of loss, rate of safety for increasing of costs is negative, which means that costs should be reduced for that percentage. In case of group C, this means that costs of production should lower to 287.040,00 RSD so that will be achieved breakeven point. CONCLUD<strong>IN</strong>G OBSERVATIONS Based on the previous, it can be concluded that the companies must monitor and take into account the requirements arising from the contemporary risky business conditions. The new conditions require the implementation of new models and methods of managing enterprises, and improving existing ones. In presented enterprise, CVP and BEP analysis gave valid information for managers to find out and decide what to do to improve business and get planned values of certain indicators. According to these methods, decision – making process is much safer and possible and the results can be achieved at a higher level. Paper showed important role of CVP and BEP analysis in crisis business conditions in way that, using them, management found out critical business points in the enterprise and directed its efforts to main problems and obstacles. REFERENCES 1. Anđelković Marija, Pešić Darko, (2005), „Breakeven Graphic’s Role in Modern Conditions of Doing Business “ (Uloga grafikona rentabiliteta u pri donošenju odluka u savremenim uslovima poslovanja), Ekonomske teme, Vol. 13, Num. 1 – 2, Ekonomski fakultet, Niš, pp. 79 – 87. 2. Berber, N., (2010), „Costs in function of economic effciency of enteprise Hissar a.d. Prokuplje“, Master thesis, (Troskovi u funkciji ekonomskog uspeha preduzeca Hissar a.d. iz Prokuplja), Master rad, Ekonomski fakultet, Subotica. 3. Horngren Charles T., Foster George, Datar Srikant M., (2000.), „Cost Accounting – A Managerial Emphasis“, Prentice Hall International, New Jersey. 4. Jakovčević, K., (1993.), „Cost in Management“ (Troškovi u menadžmentu), Ekonomski fakultet, Subotica. 5. Jakovčević, K., (2002.), „Contribution to the measuring of the dynamic of costs on the formation of lower marginal profit“ (Prilog merenju dinamike troškova kod utvrđivanja donje granice rentabilnosti), Privredna izgradnja, Novi Sad, pp. 19 – 33. 6. Kukoleča, S., (1968.), „Business Economics“ (Ekonomika preduzeća), Knjiga 1, Informator, Zagreb. 7. Mejcen, Ž., (1971.), „Costs in Theory and Practice“ (Troškovi u teorji i praksi), Zagreb. 8. Mellerowicz, K., (1973.), „Kosten und Kostenrechung“ I Band, Theorie der Kosten, 5. Avuflage, Berlin – New York. 9. Očko, J., Švigir, A., (2009.), „Controlling of Costs in Production Company“ (Kontroling troškova u proizvodnom društvu), Računovodstvo, revizija i financije, br. 7/09, RRiF Plus, Zagreb, pp. 49 – 58. 10. Perčević, H., Dražić Lutilsky, I., (2006.), „Accounting Models of Evaluating Product Profitability“ (Računovodstveni modeli ocjene profitabilnosti proizvoda), Zbornik Ekonomskog fakulteta u Zagrebu, Year 4, Faculty of Economics, Zagreb, pp. 309 – 330. 11. Official financial statement of the enterprise for „XY“for 2008 and 2009 year. 12. www.wiley.com/college/sc/eldenburg/ch03.pdf (date of access 31.08.2010.)
Page 1 and 2: THE ROLE OF COST - VOLUME - PROFIT
Page 3 and 4: or foregone to achieve a specific o
Page 5 and 6: While profitability chart is not a
Page 7 and 8: lack of capacity). Selection criter
Page 9 and 10: Table 2 CVP analysis in domestic ca
Page 11: REVIEW OF THE RESULTS OF THE ANALYS

BREAKEVEN GRAPHIC IN CRISIS BUSINESS CONDITIONS

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