Patent ID: 7302409

Claim:
A business method of accounting using absorption costing, including a method of drawing a break-even chart, the break even chart expressed using a 45-degree line obtained from an income statement of a company which adopts absorption costing including standard costing as an input measurement basis, in which standard costing comprises costing based on an intra-company transfer price system, the income statement generated using absorption costing by the use of computer calculations, the business method comprising the steps of: setting up rectangular coordinates, with a horizontal axis as sales X and a vertical axis as cost+profit sales, defining η=net carryover manufacturing overhead applied in inventories=manufacturing overhead applied in year-beginning inventory−manufacturing overhead applied in year-end inventory, treating C+G+η as fixed costs where C=actual manufacturing overhead and G=selling and actual general administrative expenses, drawing a fixed-cost line parallel to X-axis, treating manufacturing direct cost in actual goods sold D X as a variable cost, drawing a variable-cost line increasing to the right through the intersection of the vertical axis with the said fixed-cost line, drawing a 45-degree line increasing to the right through the origin, determining the break-even point for the operating income obtained from the income statement generated under absorption costing by identifying the intersection of the variable-cost line with the 45-degree line.