Essays on Break-Even Point

Business

The company will make an income of $148,000+$12,000=$160,000 to break even in one year.

How much revenue will the business have to earn to break even in economic terms?

The break-even point in economics term considers the opportunity cost as follows $148,000+$12,000+$35,000=$195,000

Suppose Sarah buys the building. Now how much will the business have to earn to break-even in economic terms

The business will now earn $148,000+$35,000=$183,000 What might be the objective of a museum? What might be the objective of a firm? Do they have the same objective? Explain The goal of a museum is to break even such that the money the institution makes can pay the workers and maintain the place. The aim ...

Product and Cost Allocation

“Luggage R Us” is a new luggage company that helps customers design, make and ship their own personalized travel luggage. The company offers four standard luggage sizes that can be used by individuals for business trips, couples on a romantic vacation, and even for a family of four. The four sizes are segregated into the carry-on, medium, large, and the extra-large (Samsonite, 2016). The standard size used for the carry-on is at 22”x14.5”x9.75”, which is within the maximum size limit for baggage for most airline companies (Samsonite, 2016). Figure 1. Luggage sizes offered However, most carry-on luggage ...

Value Chain

The objective of analyzing Monster’s value chain is to make a product that will become popular to its customers, which includes not only the production segment but also marketing and distribution (Horngren and Data, 2015). This is because products will eventually need to be discontinued due to changing customer preferences and product innovation from competitors. This means that the company’s core operations and its products must continuously evolve and this could be done using the value chain analysis tool. For an energy drink company like Monster, one of its main goals is to continuously adapt to the ...

Cost structure

Monster Beverage Corporation is a manufacturer and distributor of energy drinks. The cost structure of the company consists of both fixed and variable costs. The unit price for a can of Monster Energy drink sells at an average price of $7.90.

Variable costs

Monster’s variable costs include the cost of concentrates and beverage bases, the cost of raw materials, re-packing costs and co-packing costs. The company’s raw materials include cans, flavours, containers, bottles, packing materials and ingredients. The table below indicates each of the variable cost items and the respective costs per can of Monster’s Energy Drink.

Contribution margin

Contribution ...

SIX-MONTHS PROJECTION OF REVENUE AND EXPENSES

REVENUE FEES 248,000 PREMIUMS 95,000 OTHERS 110,000 453,000 EXPENSES COMPENSATION AND BENEFITS 120,000 DIBEATES COST AND DRUGS 190,000 FOOD SUPPLY 70,000 OTHER EXPENSES 70,000 TOTAL VARIABLE COST 450,000 CONTRIBUTION MARGIN 3,000 FIXED EXPENSES 380,000 In business, budget involves a plan that the hospital will employ to determine the difference between the outgoing expenses and the incoming revenues. The budget will help ensure proper use of the available resources as previously planned without exceeding the budget. It also helps in the justification of the appropriate use of the funds, ...

LIMITED LEVERAGE

One thing that is clear from the vignette is Frank does not want to close his business and work for someone else. However, he must replace his primary asset, his truck, or he will be forced to close the business. Since he does not have the equity to purchase the truck, he must find the funds somewhere else. The only options are to find an investor or borrow the money. The vignette mentions nothing about an option to find an investor. He is adamantly against using debt. His daughter Stephanie suspects he does not know the proper use of ...

Literature review2

Research methodology..3

The purpose of using interactive digital menus in restaurants and pubs.4 The examples of a digital menu integration in trading venues5 The benefits of using interactive digital menus6 The working principle of e-menu in restaurants and bars 8 Conclusion....10

Bibliography 11

Introduction The current technological conditions are fascinating. The struggle between the outdated technologies and innovations can be seen every single day. The printed information has been already replaced by digital technologies, cell-phones have been replaced by smartphones, tablets and laptops replaced books and journals, and even in restaurant industry, the old-fashioned paper menu is being replaced by new ...

MANAGEMENT ACCOUNTING REPORT

Introduction This report covers budgeting, break-even analysis, and the analysis of make-or-buy decision. The budgeting details the purpose of a budget and the importance of involving staff in developing a budget. The report contains a direct material purchase budget (in units and in dollars), a direct labor budget (in hours and in dollars), and a manufacturing overhead budget. The break-even analysis compares the hammer division break-even point locally and in Myanmar. The break-even analysis indicates that the business will have a lower break-even point if they shift the hammer division to Myanmar because of lower fixed costs and reduced ...

Recommendations to the Restaurant Manager

In the current state, the restaurant is profitable. The break-even point is 89,474 covers with a margin of safety of 10,526 covers, and the net profit is £60,000. This implies that the restaurant sales have to fall, by at least 10,526 covers for it to start making losses. The manager has several considerations to make on measures to improve the profitability of the restaurant. The available options and offers are discussed below.

Reducing the price to £10.00

If the price is reduced to £10.00, there will be a rise in sales to 12,000 covers. The contribution margin will fall ...

Management Accounting

Step 1: Question 1: The total variable cost for the company comprises of manufacturing costs and sales and administrative cost. Accounting both, the total variable costs for the firm was calculated at $10 per unit

Question 2:

The total production costs for any organization is bifurcated as fixed costs and variable costs. Important to note, while the variable costs and output carry a direct and proportional relationship, fixed cost is not related to output level and remains constant throughout. In other words, while the variable costs increase in proportion to the increase in output level, fixed cost does not change and ...

Introduction:

Operating leverage refers to the amount of fixed costs a company has. Here the term fixed costs can be referred to as fixed operating expenses such as, rent for the office premises, lease payments etc. Important to note, that, the greater operating leverage has higher variability on the operating earnings of the company as most of the costs involved are fixed In the accounting and finance literature, the degree of operating leverage is calculated as the percentage change in operating income (EBIT) that results from a given change in percentage of sales.

However, even this performance measurement tool has associated ...

1) The new process by McDonald’s helps to deliver fresher hamburgers to its customers. Unlike the old make-to-stock process, where hamburgers were prepared before customers placed orders, the new process allows hamburgers to be assembled after the order is placed. The key elements of the new system are the use of technology for storing ingredients and the response time of 15 seconds. Despite the improvement in hamburger freshness achieved with the new process, McDonald’s hamburgers are still not the freshest. Wendy’s is using a slower process, in which hamburger is cooked from raw ingredients after the order ...

1.) Break-even analysis is an important tool, which helps to define the level of sales needed for the company to break even. The basic formula for calculating the break-even point is (fixed costs)/(selling price – variable cost per unit), however in some instances this formula is further adjusted for noncash items, in order to evaluate the break even position from the cash flow prospective only. The independent variables in this calculation are selling price as well as fixed and variable costs, while the dependent variable is the level of sales, needed to break even. This relatively easy ...

What ethical dilemma was Bob Hopkins facing?

Ethical issues, also known as moral dilemmas, are events or situations that involve two or more options for an individual. However, neither of the two options in the case is ethically correct. Bob found himself in an ethical dilemma after receiving an order for Stan Paris who ordered 600 pieces of 3*12 Doug fir-rough-sawn and did not specify the purpose for the planks. Bob accepted the order because it seemed to create a financial breakthrough for the month of February. The ethical dilemma arose after Mike Fair-weather, his business partner, called to inquire if Bob had received a call ...

Part I

Answer 1 It is a static budget in since the planner had already set the expenses together with the expected revenues. The fees each student was to pay had already been determined and accounted for. Each student was required to pay, the estimated grants to expect and the expenses that would go to salaries, purchase of equipment and other miscellaneous expenses.

Answer 2

The total revenues for the 120 students less grants was 802,567-(50,000+10,000+5,000+10,000) =727,000. Total revenue per student727,000/120=6058.3333. The total revenue less grants for the 100 students was: 681, ...

GUARDIAN ANGELS FASHIONS

Executive Summary Guardian Angels Fashions is a modern clothing retail outlet that deals with youths’ attire. This retail outlet will deal with the upcoming youth fashions, and thus this will make it fulfill the uniqueness criterion. The target customers for Guardian Angels Fashions are the youths who dominate in the society. Youths value the upcoming fashions in the clothing industry, and thus this retail outlet aims to utilize this opportunity by providing these basic commodities to them at pocket friendly prices. Over the next four years, Guardian Angels Fashions outlet aims to expand its operations up to the national ...

Corporate Finance

Section 2: Capital Budgeting Introduction The process of capital budgeting is the most modernized method of evaluating a prospective capital project. Since the capital budgeting techniques evaluates the profitability of a capital project, any corporate decision with an impact on the future earnings of the company can be examined using this framework. For Instance, if Glencore Xstrata wishes to evaluate two independent projects in terms of which Project will be profitable for the company, they can select any of the following capital budgeting techniques to evaluate the same: - Net Present Value(NPV) Method - Internal Rate ...

Business Plan: Children’s Sport Watch

Executive Summary The ‘KidsGo’ will not face any major competition at initial level because there is no company offering exact product. However, Ibitz is currently selling pedometer that monitors steps taken by the kids. User friendly, customize solutions for different needs, and accessibility to information through website are major advantages KidsGo watches have over competitors’ products. However, it is important for the company to keep introducing new functions, apps and other benefits in order to maintain competitive edge because there are high chances of technology imitation. ‘KidsGo’ will initially invest in marketing communication activities and establishing technical ...

Commercial Plane Company limited

Cost statement/ unit ‘Millions’ ‘millions’ Selling price 105 Less: Variable cost ( 90) Contribution 15 Break-even point refers to the point whereby the total sales or revenue of a company are equal to the company’s costs incurred on the units sold. The break-even point can be calculated in terms of the number of units that require to be sold in order to cover the sales value required as well as being represented in terms of sales or revenue value based on the currency of the country where the transaction is taking place. Breakeven ...

Question one

E[r] =SkP(s)rk Where E[r]= is the expected return, FOR (A) P (k) =probability that the rate (rs) occurs, (A) = (0.3, 0.4, 0.3,) FOR (B) = (0.2, 0.3, 0.3, 0.2) Rk = the return at s level FOR (A) =11%, 15%, 19% FOR (B) =--5%,6%,14%,22% For (B) = 0.3*11 %+( 0.4*15) + (0.3*19) =11.733% For (A) = (0.2*-5%) + (0.3*6%) + (0.3*14%) + (0.2*22%) =0.094%

Therefore from the calculations above, investment in stock A is better in terms of its performance capacity.

Question two Capital pricing model g + (current annual dividends (1+x) /current price)

Where x is constant growth

For TASCO, the corresponding rate of return = 1261.66 For ...

Part One:

a) Calculate the Weighted Average Cost of Capital WACC: Weight of Debt* Cost of Debt(1-Tax rate) + Weight of Equity* Cost of Equity WACC:[( 200000/400000)* 0.09(1-.22)] + [(200000/400000)* .15] WACC: 0.0351+ .0300

WACC: 6.51%

*WACC that is also known as Cost of Capital will be used further to discount the cash flows of the company. b)Calculation of Capital Allowance and Tax Payable on each project:

Project A:

Tax depreciation Capital Allowance and tax liability *Assuming that business loss for Year 1 will not be carry-forward to be offset from Year 2 profit and also there is no minimum ...

Summary

Hospitality industry has grown in the recent past. The increase has necessitated investors to tap the market gap by setting up or upgrading the existing businesses. In return, this requires funding that again calls upon investors to determine the available avenues to get funding. The acquired finances will require to be properly managed by maintaining records of account and analysing the financial strength. Planning would be necessary to ensure the resources are utilised efficiently. This can be done by maintaining a budgetary process.

Introduction

The business funding is becoming increasingly important in the global economy. With the new wave of globalization ...

Question 1

Profit maximization by a firm is a process to determine the best possible output and the pricing levels so as to maximize its return. As a step in that direction, companies adjust factors that are influential, such as; projection costs; sale prices, and output levels as a way of attaining its profit goal. The two main profit maximization methods used are: Marginal Revenue Method and Total Cost-Total Revenue Method.

Question 2

Say if the price elasticity of demand for a given product is inelastic, then in that case a price increase will also increase the total revenue. Therefore, the executive implies that a price increase will result in ...

6.0 Budget

Annual Sales Forecast

The annual sales forecast is estimated through the percentage of the estimated gross profit margin getting divided with the annual projected overhead. This provides the breakeven sales figure. Thus, given that the domestic market for the fashion industry adds to 60-65 percent of the entire fashion market and the international market comprises of 15 to 18 percent; both provide an overview of the estimated profit. The annual sales forecasts are derived through selling price – direct costs divided by the selling price multiplied by 100 (Kieso, Jerry and Terry). Thus, the minimum selling price of most of the ...

Income Statement

Both absorption and contribution income statements provide the interested parties with the information on company’s revenues, expenses, profits and losses. According to Ross (2011), both types of income statements may seem similar from the first glance, as the first line depicts company’s revenues, while the bottom line shows company’s profits for the accounting period. However, the system of cost accounting is what distinguishes one type of income statement from another. Brealey (2001) states that absorption costing is used during the preparation of financial statements for external purposes, such as tax reports, annual reports to shareholders ...

Application Questions-sample responses

1-Why are you applying for this degree program? In the modern dispensation, undergraduate degrees are first loosing their essence. There is increased competition in every field in everyone is required to enhance their skills based on the prevailing market needs. Employers are increasingly going for people who are more qualified in terms of education experience. My desire to take my career to the next level has prompted me to take an MBA course. It is because without an advanced education program, it becomes difficult to remain competitive in the market. I have learnt a lot of issues from my ...

<Student’s name>

Question #1

a) Break-even analysis is important to assess the current state of the enterprise and its dynamics, as well as for the development strategy of the company. For the definition of concepts such as break-even point and financial headroom is necessary, first of all, to define the fixed and variable costs. These concepts are used in the solution of almost all kinds of administrative tasks in the system "costs - production volume - profit."

Fixed costs do not depend on the quantity produced.

Example: The company leases land. For this land has to pay a rent of $ 100. This cost is formed regardless of the ...

Company researched, Apple Inc.

Apple Inc. is a multinational company that deals with manufacture and distribution of consumer electronics, both hardware and software products. The hardware products personal computers, iPod music player, iPhone smartphone, andiPad tablet computer, while the software products include the OS X and the IOS operating systems, the iTunes media browser and the safari web browser. Apple Inc. was incorporated as Apple computer Inc. on January 3 1977. However the word computer was removed from its name on January 9 2007, on the eve of that day Steve Jobs introduced the iPhone reflecting its focus in consumer electronics. Current statistics indicate ...

Question#1.

- Explain Confidence intervals estimation and significance testing and its usefulness in a business organization. According to Cox D.R., “Confidence interval is the term used in mathematical statistics in interval (as opposed to point) evaluating for statistical parameters, preferably with a small sample volume”. Trustee referred to as an interval that covers the unknown parameter with a given reliability. The method of confidence intervals by the American statistician Jerzy Neyman, based on the ideas of the English statistics Ronald Fisher. The confidence interval for θ distribution of random variable X with a confidence level of 100%-p”, begotten by the sample ( ...

Cost-Volume-Profit (CVP) is an analysis tool that is used by managers to determine the effects of product costs and sales volume on profitability of a business. It is concerned with how changes in unit variable costs, fixed cost, selling price for each unit, activity level and sales mix affect profitability. A CVP analysis consists of a CVP statement of Income, margin of safety, break even analysis and projected income. This paper seeks to discuss the features of CVP and the reasons why managers are interested in break-even analysis. Lastly, it will compare contribution margin and fixed costs. There are five ...

Business

Introduction This is a feasibility study project that aims to establish a pre-plan for the restaurant business. This feasibility study is also aims to provide basic information that will help in better decision making for the proposed restaurant business. Study will include some key points that may help establish a strong and stable business and aims to target the possible opportunities and challenges that this business might encounter. The paper will be written in a form of providing the industry and market feasibility; discussing the overview of the industry which the proposed business is included and its strengths, weaknesses, and viability from the ...

Financial Analysis (Competition Bikes Inc.)

Abstract The purpose of this research will discuss about how the company should change its costing method to the activity-based on costing. It will contain the evaluation of cost-volume-profit regarding of the sales units and sales dollars for Carbon Lite and Titanium bikes. It will support what company management needed to increase the cost of direct materials by 10% and the fixed costs to the production facility. There also some factors that have been discussing in this research about the ways of the company how to innovate their product in increasing their cost profit. However, the quality the ...

- Scott Cook and Tom Proulx collected what is known as Primary Data. According to Professor Hossain from the website Spirkle Express Documents (2012), primary data, or raw data, is data that is collected through the process of investigation. Primary data is unfiltered and pertains directly to the field under investigation. In the course of their investigation, Scott and Tom became intimately aware of what their customers needed based on what is actually useful to them. Instead of creating a product that created a need, Scott and Tom created something that already is needed, that being personal finance management. I believe ...

Want Beverages strengths

Want Beverages is a beverage company based in Burlington, Ontario owned by Bill and Angela Moffat. Even though the company owners could clearly picture where they want their company to be in the next few years, they are not sure of the means of making it get there. Strengths are those attributes that will enable the firm to increase its sales to a level that will ensure success in achieving its long-term goals. The firm operates in a dynamic industry, which requires it to position itself to achieve a competitive edge over other competitors (Fredrick and Gary, 2011).

The Moffats have represented various ...

Introduction

The name of this business is Star Magazine. The name springs from the kind of the business together with the activities involved. The Star Magazine will be involved in the marketing of an educative, informative, and inclusive magazine called Star. The magazine captures such critical areas in the society as Education, Environment, Entrepreneurship, and Empowerment. Consequently, the Star Magazine organization highlights these as the key areas the society that needs to be addressed accordingly. It is however important to note that the main role of the company is to get the content of the magazine from a group of university ...

Break-even point indicates the number of units to be sold by a company to meet all its expenses and make zero profit. It is calculated by dividing fixed cost of production divided by the contribution per unit. Where, contribution per unit is the difference between selling price per unit minus variable cost associated with one unit. Referring to the excel sheet, Pringly’s break-even point at the first scenario is 142857.1429 units while in the second 147058.8235 units are required to break even (Walther, 2010). The units required to be sold so as that the company can achieve a profit ...

Abstract

Andrew’s Hair Styling is a hair salon offering only haircuts. This paper evaluates the company’s contribution margin, break-even point, and operating income under two distinct compensation structures. In the first case, barbers are paid only a fixed hourly wage. In the other case, barbers are paid a lower fixed hourly wage together with an incentive payment for each haircut. The business owner is interested in the effects of the revised compensation method on the aforementioned performance indicators. The calculations indicate that, although the revised compensation structure will reduce annual fixed costs by 49%, it will also reduce net operating ...

Break even analysis

The break even analysis method had been a slightly controversial issue about economics and management because many are debating whether it could indeed help a business survive in the long run or not. As a brief summary about what a break even or a break even analysis is, it could be considered as a point wherein a company or a corporation stays at a balanced level where there is no net loss or gain. When we say loss or gain, we mean profits and revenues.

So technically, when there is a break-even point, the outstanding costs and profits are supposed to be at the same level. The business should ...

1. Why is using the cost of equity to discount project cash flows inappropriate when a firm uses both debt and equity in its capital structure?

The cost of equity is inappropriate as it fails to correctly show the company’s cost of financing. The most appropriate discount rate should reveal the both the cost of debt and the equity financing of the company, given that capital as a resource, has a cost linked to it.

2. Why would a project that reaches the break-even point in terms of net income potentially be bad for shareholders?

For a project to be acceptable, it must ...

1.0 BUSINESS DESCRIPTION

Skylux Construction Company will be located in Fairfield, New South Wales. It will be a sole-proprietorship business. The business will be a construction company, offering construction services to builders and other consumers. It will also offer renovation and remodelling services to homeowners. The company has the ability, personnel and skill to meet its client’s needs and requirements. The physical address of the company will be 1457 Pitt Street Mall, New South Wales, Australia. The company will officially start running on 1st July, 2011.

The business being a sole proprietorship will be managed by the owner, who will be the general manager ...

Unit:

Solution to the Question

When fixed price is 1,000,000

Number of workers= 50,000

Workers daily wage=80

Other variable cost= 400,000

Therefore Total variable cost= (50000*80) + 400, 000

=4,400,000

Units of Output per day=200,000

Therefore, Average Variable Cost=4,400,000 / 200,000

=22

Average total cost= (4,400,000+1,000,000) /200,000

=27

Work productivity= 200, 000 / 50,000

=4 When the fixed price is at 1,000,000, the total cost per unit is $27. Considering the firm sells the output at $25 per unit, and then at this fixed cost, the firm is making a loss of $2 per unit.

When the fixed cost is at 3,000,000

Total variable cost=4,400,000 (calculated in part a)

Average variable cost =22 (calculated in part a)

Average total cost= (4,400,000+3,000,000) / 200,000

=37

Work productivity=4 (calculated in part a)

Advise: When the fixed cost is at $ ...

Break-even point can be defined as the financial point/position where the costs used to produce a certain product equals the revenue it generates. At this point, the respective firm will have not received any profit or loss (Eddie, 2009).

Mathematically this can be represented by:

TC=TR

Where:

When a firm realizes its break-even point, it ought to assess if it will be possible to produce more quantities or not. If it can then they would be better off but if it can’t then they will have to reduce the fixed costs, variable ...