Fixed Cost and its importance in BEP

Fixed Cost & its importance in BEP

• Meaning of Fixed Cost :  A cost does not change with an increase or decrease in the Goods produced.

• In General, companies can have two types of costs, i.e., Fixed Costs and Variable Costs.

• Also called as Indirect cost or Overhead costs.

• Examples:  Lease Rentals, Salaries, Insurance, Taxes, Interest expense, Depreciation etc. 

• All Sunk costs are Fixed Costs.  But, all fixed costs are not sunk costs. 

• Sunk cost: Money that has already been spent and which cannot be recovered.  Examples are Machinery Cost, Lease expense, etc.

• A fixed cost per unit is always variable; Whereas Variable cost per unit is always fixed.

• Segregation of Total Costs into fixed Costs and Variable costs helps the Management to decide the scale of Production and Breakeven analysis.  

• Example: A company Produces Pens.  Their fixed costs are Rs. 10000 and Variable costs are Rs. 10 per Pen. Selling price per pen is Rs. 120.  Find the Total cost for 100 Pens and 200 Pens and Profit on two options. 

100 Units

Costs	No of Pens	Rate per Unit	Total
Fixed	100	100	10000
Variable Costs	100	10	1000
Total costs	100	110	11000
Selling Price	100	120	12000
Profit	100	10	1000

200 Units:

Costs	No of Pens	Rate per Unit
Fixed	200	50	10000
Variable Costs	200	10	2000
Total	200	60	12000
Selling price	200	120	24000
Profit	200	60	12000

• From the above, the Fixed Cost per Unit is changed from Rs. 100 to Rs.50 when Production was increased from 100 units to 200 Units.  Whereas, Variable cost remained fixed though production was increased from 100 units to 200 units. 

So, when change in the Production:

• Fixed cost per unit is variable  (though Total Fixed cost is fixed)

• Variable cost per unit is fixed. (though Total Variable cost is variable)

• The segregation of Total costs into Fixed Costs and Variable costs helps the firms to analyze the breakeven analysis. (Where there is no profit, no loss) and increase their profit capacity.

BEP –Break Even Point = Fixed Costs / Sales Price per Unit – Variable Cost per unit 

• In the above example 100 units production level, BEP is 10000/120 – 10 = 91 Units.   

• That means at the point of 91 units, there is no profit or no loss.

At 91 units

Costs	No of Pens	Rate per Unit
Fixed	91	109.90	10000
Variable Costs	91	10	910
Total	91	119.90	10911
Selling price	91	120	10920
Profit	91	0.10	9

Profit Rs.9 is almost negligible.  Hence at the production of 91 units, there is no profit, and there is no loss.   So Break Even Point (BEP) is 91 units 

Key Points for MCQ 

1. BEP stands for Break Even Point 

 

2. Fixed cost - other names are Overhead cost or Indirect Cost 

 

3. All Sunk costs are Fixed Costs.  But, all fixed costs are not sunk costs. 

 

4. Sunk cost: Money that has already been spent and which cannot be recovered.  Examples are Machinery Cost, Lease expense, etc.

 

5. A fixed cost per unit is always variable; 

6. Whereas Variable cost per unit is always fixed. 

 

7. BEP formula = Fixed Costs / Sales Price per Unit – Variable Cost per unit

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Indian Railway Codes and Manuals - Revised

 

Indian Railways Codes and Manuals - Revised ones

Click below for 

   Codes and Manuals

Revised Codes 

Accounts Code Volume 2 Revised Edition 2023 

Finance Code Volume I  Revised Edition 2022

Finance Code Volume II  Revised Edition 2022

Rolling Stock Code Revised Edition 2022

Railway committees

 

Railway Committees

Event	Year	Committee (recommended by)
Railway Board established	1905	Sir Thomson Robertson Committee
Railway Department established	1908	Railway Finance Committee
FC - Financial Commissioner appointment	1923	Sir Acworth Committee
Separation of Railway finances from General Finances or Railway Budget from General Budget	1924	Sir Acworth Committee
Brought Railway Accounts under the control of GM (instead of FC)	1941	Indian Railway Enquiry Committee (commonly known as  Wedgewood Committee)

Difference between M&P and T&P

Difference between M&P and T&P

 

Source: Para 1019 & 1020 of Rolling Stock Code

 

SN	M&P		SN	T&P
1	M&P stands for Machinery & Plant		1	T&P stands for Tools & Plant
2	A Machine that remains stationary nd immovable (Job comes to Machine) and all Vehicles (all types)		2	An item that is movable (Machine comes to Job)
3	Examples: All immovable Machines, Staff cars, Lorries, Buses, Ambulances, Road Mobile cranes,  etc		3	Examples: Pneumatic drills, power saws, tools and plants such as jigs & fixtures. Small tools & equipment. Upkeep of Office such as Furniture, computers, printers etc
4	Costing more than Rs. 50 Lakhs and Vehicles irrespective of its cost  processed through M&P Portal (maintained by Railway Board)   Costing up to Rs. 50 Lakhs each - (except Vehicles) can be sanctioned by Zonal Railways under GM’s powers		4	Costing up to Rs. 10 Lakhs referred as T&P and procured by Zonal Railways
5	Charged to Capital (Plan Head 41 - M&P)		5	Charged to Revenue

 

Key Points for MCQ

1. M&P stands for Machinery & Plant 
2. T&P stands for Tools & Plant 
3. M&P - Job comes to Machine
4. T&P - Machine comes to Job 
5. M&P - costing more than Rs. 50 Lakhs processed through M&P Portal
6. All Road vehicles treated as M&P irrespective of Value and processed through M&P Portal
7. M&P portal maintained by Railway Board 
8. M&P - costing less than Rs. 50 Lakhs - processed by Zonal Railways under GM’s powers
9. T&P - costing up to Rs. 10 Lakhs charged to Revenue
10. M&P charged to Capital (Plan Head 41) 

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Deleted Questions Procedure in CBT conducted by NAIR for LDCE and 70% Selection Examinations

 

Deleted Questions Procedure in CBT 

Source: Railway Board Letter No.  E(GP)2022/2/4 dated 26.10.2022  (RBE No.134/2022) Click for download  and dated 28.11.2022 Click for download

SN	Example	Applicable / Not Applicable	Final Score calculation
1	Answered 150 questions or less than 150 questions, but the deleted question is not one of the attempted question	Not Applicable	Out of 150
2	Answered 150 questions and 5 questions of these have been deleted	Applicable	Out of 145 (recalculated out of 150)
3	Attempted 130 questions (out of required 150 questions) and 2 questions of 130 questions have been deleted	Applicable	Out of 148 (recalculated out of 150)

ILLUSTRATIVE EXAMPLES

SN 1 - Answered 150 questions or less than 150 questions, but the deleted question is not one of the attempted questions :  

Candidate A answered 140 Questions. Out of  140 questions, 120 are Correct  and 20 are incorrect.  His score is as follows.

	No. of Questions	Marks
Correct answers	120 x 1	120
Incorrect answers	20 x ⅓	Minus 6.67
Net Marks		113.33

Net score:  113.33 out of 150

SN 2 - Answered 150 questions and 5 questions of these have been deleted   :  

Candidate B answered 150 Questions. Out of  150 questions, 141 are Correct,4 are incorrect and 5 are deleted  His score is as follows.

	No. of Questions	Marks
Correct answers	141 x 1	141
Incorrect answers	4 x ⅓	Minus 1.33
Net Marks		139.67

Provisional Score:  139.67 out of 145 

Now recalculate the same for out of 150

145      —----------  139.67 

150     —------------   ?

= 150 / 145 x 139.67  = 113.45

So Net Score = 144.49 out of 150 

SN 3 - Attempted 130 questions (out of required 150 questions) and 2 questions of 130 questions have been deleted   :  

Candidate C answered 130 Questions. Out of  130 questions, 100 are Correct,28 are incorrect and 2 are deleted  His score is as follows.

	No. of Questions	Marks
Correct answers	100 x 1	100
Incorrect answers	28 x ⅓	Minus 9.33
Net Marks		90.67

Provisional Score:  90.67 out of 148 

Now recalculate the same for out of 150

148      —----------  90.67 

150     —------------   ?

= 150 / 148 x 90.67  = 113.45

So Net Score = 91.90 out of 150 

Disclaimer:  

• Some questions in the CBT for LDCE conducted on 20 November 2022 are deleted by the Railway Board . 

• The above write up just throws light on the Railway Board’s Policy of deleted questions.  The blogger tried to explain in simple manner the Railway Board’s policy regarding the same.

• The blogger is not responsible for the mistakes or discrepancies in the above calculations or method of calculation if any.

• The candidates need to go through the Railway Board letters cited above (hyperlinks provided for download) and calculate their score accordingly. 

Note: Any mistakes in the above calculations may please be brought to the notice of the blogger for correction. Thank you

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Additional Pension / Family Pension

                      

Additional Pension / Family pension

1. Pension/Family pension is increased by 20% on reaching 80 years of age. 

2. This is called Additional pension.

3. The additional pension is as under: 

On reaching	Additional Pension as percentage of  Pension / Family Pension
80 years	20 %
85 years	30 %
90 years	40 %
95 years	50 %
100 years	100 %

4. Dearness Relief is paid on Additional Pension.

5. The additional pension/family pension is paid from the first day of the month in which the pensioner/family pensioner reaches 80,85,90,95 & 100 years of age.

6. Additional pension/family pension is shown separately in PPO (Pension Payment Order) 

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