Application: Break-Even
Analysis
When expenses and revenues are equal, this is known
as the “break-even point” or BEP. To determine break-even, an examination of
fixed and variable costs (expenses) in relationship to revenues is necessary.
Understanding where the BEP is for a given product or service helps managers
determine how to make modifications to increase profitability.
For this Assignment, review this week’s Media, the
Weekly Briefing, and the information given below.
LaTricia Jones is planning to make a unique toy
that will keep small children entertained for hours! She believes that parents
everywhere will want to buy her toy, and she needs to determine her costs and
the number of toys she needs to sell before earning a profit.
After researching her costs, she has come to the
following conclusions.
·
The rental of a small facility will be $2,200 per
month, insurance $500 per month, and other fixed costs are estimated at $1,300
per month. In this facility, she will be able to produce 100 toys per month at
a variable cost for each toy of $5.00. She plans to sell them for $30 each.
·
The rent for a larger facility will be $5,000 per
month, insurance $1,000 per month, and other fixed costs are estimated at
$2,580 per month. In this facility, she will be able to produce 400 toys per
month at a variable cost for each toy of $4.00. She plans to also sell them for
$30 each.
The Assignment:
·
Part 1:Calculate the
break-even point for LaTricia Jones’ toy company under each of the two
different scenarios using a spreadsheet program such as Excel. Be sure to apply
the appropriate accounting process to determine the break-even points.
·
Part 2:Recommend
which option, based on the scenarios for the company, that you would select
using a word processing program such as Word. Support your conclusion with both
a written analysis and quantitative data.
Submityour
Application (both your Excel and Word files) by Day 7.
To submit your Assignment, do the following:
·
Save Part 1 of your Assignment as a “.xls” file
with the filename “WK6AssgnP1+last name+first initial.xls”. Sally Ride’s
filename would be “WK6AssgnP1RideS.xls”.
·
Save Part 2 of your Assignment as a ”.doc” file
with the filename “WK6AssgnP2+last name+first initial.doc”. Sally Ride’s
filename would be “WK6AssgnP2RideS.doc”.
·
To upload Part 1 of your Assignment, click on Assignmentson the course navigation menu, and then click the Assignment Part 1 – Week 6link.
·
To upload Part 2 of your Assignment, click on Assignmentson the course navigation menu, and then click the Assignment Part 2 Turnitin – Week 6link.
General Guidance on
Application Length:
Your Application, due by Day 7, will
typically be 2–3 paragraphs in length as a general expectation/estimate for
each bullet point. Refer to the rubric for the Week 6 Application for grading
elements and criteria. Your Instructor will use the rubric to assess your work.
