What is the profit analysis and break even analysis of the following chapter?

timer Asked: Nov 4th, 2015
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Question Description

1a. What is difference between fixed costs and variable costs? Define and give an example for each.

1b. What are the two primary differences between P&L statement and income statement?

Tutor Answer

School: University of Maryland

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1a)In economics fixed costs and variable cost are the two main cost associated with the production of goods and services.

Fixed cost are the cost that do not vary with the level of production.They are the same if the company produces 1 unit or million unit.Example:-It typically includes such thing like renting a room where the room rent does not changes regardless of the number of room it rent.

Variable Cost:-Variable costs are the costs that do vary with the level of production.For example Suppose a company produces cakes with a  unit price of $2,so if the company produces 10 unit it would cost $20 and if it produces none then the cost will be 0.

1b)In financial accounting the balance sheet and the income statement are the two most important types of financial statement.

Two primary differences:-

i)A balance sheet lists assets and liabilities of the organization as of a specific moment in time, i.e. as of a certain date where as  an income statement — also called a profit and loss account or P&L statement is a report for income and expenses over a specific time period, usually a quarter or year. 

ii)A healthy income statement  of a company  over a year implies the company has a strong balance sheet but it is not the case when the balance sheet is strong but a weak income.



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