ABSTRACT
This chapter discusses two methods of cost analysis, namely break even analysis and benefit cost analysis. The essence of break even analysis is that in every business scenario, there will be a situation wherein the total cost incurred in producing a product or offering a service will invariably be offset by the total revenue obtained from selling it. The chapter considers various applications of break even analysis such as profitability analysis, and consideration of different alternatives. It also discusses the concept of fixed cost and variable cost. The chapter presents various scenarios in which benefit cost analysis can be used. The application of incremental analysis to solve problems related to benefit cost analysis in order to maximize total profit is also presented and explained in detail through rigorous problem solving. The basic concept of benefit cost analysis is to maximize the benefit for every unit of currency invested (cost) into an asset.
