Beruflich Dokumente
Kultur Dokumente
accounting
Another
management
tool
that
inadvertently
encourages
growth
for
growths
sake
is
break-even
accounting.
Like
marginal
income
accounting,
the
theory
is
that
certain
elements
of
overhead
cost
vary
with
the
volume
of
operations,
while
others,
which
are
called
fixed
costs,
do
not.
The
sale
price
is
set
to
provide
for
material
and
labor
costs,
plus
variable
overhead
costs,
plus
an
additional
increment
to
allow
for
fixed
overhead
costs
and
profit.
When
the
sales
volume
is
high
enough
in
a
given
period
to
absorb
all
variable
costs
as
well
as
the
lump
of
fixed
overhead
costs,
you
have
reached
the
break-even
point.
The
margin
above
variable
costs
on
additional
sales
goes
entirely
to
profit,
because
all
the
fixed
overhead
costs
have
already
been
taken
care
of.
No
wonder
a
manufacturer
gloats
about
a
high-volume
month,
because,
although
he
makes
no
money
and
actually
loses
until
the
volume
reaches
the
break-even
level,
his
profit
on
volume
above
the
break-even
point
is
disproportionately
large.
The
fallacy
of
break-even
accounting
is
the
assumption
that
expenses
are
easily
divisible
into
fixed
and
variable.
Overhead
is
rarely
as
fixed
as
accountants
are
inclined
to
think,
except
for
very
short
periods.
In
any
long-range
analysis
of
a
business,
there
is
no
such
thing
as
fixed
overheadit
is
all
variable
to
some
degree,
even
such
items
as
rent,
heat,
light
and
power,
depreciation
and
amortization,
professional
services,
and
executive
salaries.
The
terms
variable
overhead
and
fixed
overhead
would
be
better
called
overhead
that
varies
immediately
with
the
level
of
activity
and
overhead
that
varies
in
the
long
run
with
the
level
of
activity.
more
Except
in
the
very
short
run,
there
really
are
few,
if
any,
fixed
expenses.
If
you
lease
a
100,000
square-foot
plant
for
a
ten-
year
term,
cost
accountants
will
normally
treat
your
rent
as
a
fixed
expense.
But
is
it
really?
If
you
dont
have
enough
space,
you
can
rent
more
and
thus
increase
that
expense.
If
you
have
too
much
space,
you
can
sublet
part
of
the
space,
or
if
that
is
impractical,
you
can
even
buy
your
way
out
of
the
lease
and
move
to
a
smaller
building.
Thus
rent
expense
can
go
up
or
down.
The
danger
is
that
some
managers
tend
to
pay
no
attention
to
so-called
fixed
expenses.
Even
worse,
they
assume
that
they
are
stuck
with
them
and
see
an
increase
in
volume
as
the
only
means
to
pay
for
them.
One
able
executive
of
a
large
merchandising
company
recently
said:
Our
biggest
problem
is
sales.
Our
industry
has
high
fixed
costs,
and
we
have
to
promote
hard
to
maintain
a
rate
of
sales
to
cover
these
costs.
Securing
more
sales
is
far
and
away
our
No.
1
problem.
This
is
a
typical,
mistaken
business
attitude:
assuming
that
the
cost
structure
is
a
given
and
that
the
company
must
grow
to
cover
all
the
overhead.