Caterpillar Inc-SLP

Caterpillar Inc-SLP - 1 Running head BREAK EVEN POINT...

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1 Running head: BREAK EVEN POINT ANALYSIS Caterpillar Inc. and Break Even Point Analysis Trident University International (TUI) ACC501, Module 2, SLP
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2 BREAK EVEN POINT ANALYSIS Caterpillar Inc. and Break Even Point Analysis In today’s competitive global economy, it is important for businesses and organizations to utilize accounting tools and functions such as Break Even Point Analysis (BEPA). By analyzing and understanding the information obtained from accounting practices and principles, business leaders and decision makers can make well informed business decisions. When businesses and organizations make informed business decisions based on factual data derived from these accounting tools and practices, results of those business decisions are more likely to be favorable and successful. The Break Even Point (BEP) is the level of sales at which profit is zero. Therefore, the break even point can be computed by finding the point at which sales equal the total of the variable expenses plus fixed expenses and profit is zero. Another definition for BEPA is the ascertainment of level of operations where total revenue is equal to total costs. There are two ways to calculate the BEP which are the equation method and the contribution margin method. The equation method centers on the contribution approach to the income statement. The contribution margin method approach centers on the idea that each unit sold provides a certain amount of contribution margin that goes toward covering fixed cost. To find out how many units
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This note was uploaded on 06/21/2011 for the course ACC 501 taught by Professor Zekeri during the Spring '11 term at Touro CA.

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Caterpillar Inc-SLP - 1 Running head BREAK EVEN POINT...

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