Wing and a Prayer

Breakeven Analysis for Product Tylenol Approach 1 - Same price as Tylenol Approach 2a - Cheaper than Tylenol Approach 2b - Cheaper w/lowered trade cost $ $ $ $ Unit Cost (Variable Cost) 0.60 0.60 0.60 0.60 Trade Cost (Selling Price to Retailers) $ 1.69 $ 1.69 $ 1.05 $ 0.70 Fixed Cost (Advertising) 2,000,000 6,000,000 6,000,000 6,000,000 Break-Even Quantity [Fixed Cost/(Trade Cost-Unit Cost)] 1,834,862 5,504,587 13,333,333 60,000,000 Contribution Margin (Unit) 64% 64% 43% 14%

In order to calculate the breakeven point, we use the following equation and budget data:

At breakeven, Q=6,658 paying customers who will be in attendance with an additional .25 x 6,658 = 1,665 comp customers.

5. Determine the necessary sales in unit and dollars to break-even or attain desired profit using the break-even formula.

Determine the unit break-even point, assuming fixed costs are $60,000 per period, variable costs are $16.00 per unit, and the sales price is $25.00 per unit.

Because each product has a different contribution margin percentage, the volume required for each break-even point would be different and will not add up to the company’s overall break-even volume of 1,100,000 units; the overall break-even volume assumes that there is only one contribution margin percentage which is :

In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.

Actual sales = 1686 (in million €) and Break even sales = 1126.61(in million €)

Breakeven = £1 million/£25 = 40,000 subscriptions Given you need 40,000 subscriptions to breakeven, do you move forward?

Using this business plan, even though the investment would be late, it would take another 3.5 years for WBL to break even, considering profit as $6100 per month (profit 359.1% of the monthly average in 2009) and an investment of $240,000.

Based on the Excel Problem of chapter one, if the total capacity for this business is 725 will you stay in it? If you want to stay in it what price you need to obtain a break even point of 725?

Break-even Dollar Volume = Total Fixed Costs / Contribution Margin = $525,000 / 0.7111 = $738,282.40

This question gives students an opportunity to exercise their ability to interpret break-even analyses. Key teaching points should include explaining the preparation of a break-even chart, the interpretation of the break-even volume (938,799 hectoliters [HL]), and the comparison of the break-even volume to the current volume (1,173,000 HL). Another key point is that the chart in case Exhibit 5 is relevant only for the current cost structure of the company—if variable costs increase or the plant expansion is approved, the break-even volume will rise. Finally, students should be aided in understanding that “break-even” refers to operating profit, not free cash flow. The typical use of the break-even chart ignores taxes, investments, and the depreciation tax shield.

The internal sales data showed that the business would need $45,000 in monthly revenue to break even. The sales forecast which have been prepared keep in mind a 65% gross margin, however, based on actual figure for 2009, this target has not been reached, and the forecasted sales have fallen.

When price is $20.6, the quantity is 1,242,425 and profit is $101, we come near to break even point.