A break–even analysis is an analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break–even analysis calculates what is known as a margin of safety, the amount that revenues exceed the break–even point.
What to use: Excel File
- Open Excel file: BreakEven-formula.xlsx
- According to your business product, update both data tables. You can focus on the red italicized costs in the tables shown below. You must change all numbers.
- In the results tables, the column ‘Units Sold’ can be replaced from 1, 2, 3, to 10, 20, 30 or 1000, 2000, 3000 or any other increasing scheme according to your unit price and possible break-even point
- All the numbers MUST be different from the sample sheet.
What to write: Word Document
- Create and name your own business (fictional business with made-up data sets)
- Describe your business’ mission statement: provide a one sentence “formal summary of the aims and values of a company, organization, or individual.”
- Business operation description for break-even analysis
- Describe your product
- Discuss Fixed Costs (land, factory/plant, equipment, etc.)
- Discuss Variable Costs (labor, materials/parts, power supply, water, etc.)
- The sample excel file has all formulas embedded. Briefly discuss how formulas are used in the file.
- Your decision-making guidelines
- Which data table is suitable for your business?
- Where is the break-even point – the number of units sold?
- When do you need to make the break-even point; 3 months, 6 months, 1 year? Explain why.
- Data Tables – copy and paste both tables: data table 1 and data table 2
- Screenshots (alt + PrtScn, then paste it to your Word doc) of Excel Sheet with Charts
What to submit
- Submit your (a) Word doc and (b) Excel file in Canvas:
- ep4-steve-brown.docx
- ep4-steve-brown.xlsx
| Unit Sold | Fixed Costs | Variable Costs | Sell Price | Profit Contribution |
|---|---|---|---|---|
| 1 | $2,500.00 | $300.00 | $445.00 | $145.00 |
| 1 | $2,500.00 | $300.00 | $485.00 | $185.00 |
| 1 | $2,500.00 | $300.00 | $525.00 | $225.00 |
| 1 | $2,500.00 | $300.00 | $565.00 | $265.00 |
| 1 | $2,500.00 | $300.00 | $605.00 | $305.00 |
| Units Sold | Fixed Costs | Variable Costs | Sell Price | Profit Contribution |
|---|---|---|---|---|
| 1 | $2,500.00 | $300.00 | $445.00 | $145.00 |
| 1 | $2,500.00 | $280.00 | $445.00 | $165.00 |
| 1 | $2,500.00 | $260.00 | $445.00 | $185.00 |
| 1 | $2,500.00 | $240.00 | $445.00 | $205.00 |
| 1 | $2,500.00 | $220.00 | $445.00 | $225.00 |
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