BKCAK-SWiJlT MALYSIS 



Profit and loss and break-ovan charts are simpl-3 and useful 

 tools in analysis and control of business operations. These charts, 

 in recent years, have foiiiid v/ider and v;ider application in industry. 

 Ordinarily used in conjunction with each other, the tv;o charts relate 

 costs to sales and measui-e profit as a function of this relationship, 



Araon^ the many examples of the types of questions answered 

 by profit and loss and brealc-even analysis the following may be cited: 



(1) Are current costs in line with what could be expected 

 on the basis of long-terra trend? 



(2) Given the current cost and price structure, what is 

 the quantity of product that must be sold to brealc even? 



(3) Given currently prevailing costs, hov/ much will an 

 increase in selling price add to profits (assmning that demand in 

 the short miii is relatively inelastic)? 



The first of these questions can be answered by a glance at 

 the profit and loss chart. This chart delineates the long term rela- 

 tionship between costs and sales and malces it possible to discover 

 deviations from exi:)ected trend values for a particular year. For 

 practical purposes, if it is decided that an excess of actual, over 

 estimated, costs cannot be defended on grounds of fundamental changes 

 in the cost structure of the operations under scrutiny, control 

 measures can be initiated without delay, 



V/hile the profit and loss chart reflects how profit varied 

 over a period of years and illustrates whether current results of 

 operations are in line with general trends, the break-even chart 

 focuses on operations during a single year and facilitates the 

 assessment of the effects of alternative policies on profit showing. 

 It is, therefore, ideally adapted to furnishing the answers to 

 questions (2) and (3) above. 



A break-even analysis for the shrimp industry is somewhat 

 handicapped by the lack of representative cost data for years prior 

 to 1952 as v;ell as by the limited number of operations for which 

 cost data were obtained by the Federal Trade Commission, Since cost 

 information for three consecutive years (1952-195^) is not adequate 

 for the constx^uction of a profit and loss chart, the analysis below 

 was confined to preparation of brealc-even charts for typical opera- 

 tions, 



Brealc-sven charts were constructed separately for vessels 

 and motor boats. From the samples of operations surveyed in each 

 year average values for catches, receipts, and costs were computed 

 and break-even catches determined. 



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