Break Even Analysis - 1227 Words

Break Even Analysis In business planning, asking the proper questions and obtaining answers to those questions is arguably the most important thing. Questions such as; how much do we have to sell to reach our profit goal? How much do our sales need to increase in order to cover a planned increase in advertising costs? What price should we charge to cover our costs and allow for the planned profit goals? Is our business going to be profitable? Answers to such difficult questions become accessible with the utilization of the break even analysis. Break even analysis can be conceived arguably as one of the simplest tools in accounting; however, its simplicity does not take away from its importance. Break even analysis is used in†¦show more content†¦In using the break even formula and plugging in the above numbers, we would determine how many units we would have to sell to break even, which in this specific case it would be 1,000 fence panels. This tells us that selling fewer than 1,000 fence panels would yield losses. Determining what the break even number is becomes very vital as we try to next project how long it will take to sell those 1,000 panels as the time it will take us to sell those panels would mean the amount of time we would have our money invested in and we would have to assess what impact having our money tied up in the production of those panels would have on the overall business and address whether we can even afford to have our money tied up into those fence panels for that specific amounts of time. In looking at the next possibility where we can use the break even analysis, it would involve the question of how to manufacture a product, in terms of the nature of operations and how it will affect fixed costs. In this instance, we as a company may have a good idea on the quantity expect, the likely selling price, and the variable costs involved, but be uncertain about how to structure the new operation. For example, if the volu me expected to be 15,000 units, at a selling price of $5 and variable costs of $3, the break even equation tells us that the fixed costs cannot be greaterShow MoreRelatedBreak even Analysis1574 Words   |  7 Pagesï » ¿Break even analysis is an important part in production management and decision making. In this assignment, the key elements of the break-even analysis will be discussed. The key elements of break-even analysis are fixed cost, variable cost, total revenue, break-even point and margin of safety. Although break-even analysis is very useful, it has disadvantages. Break-even analysis is based on the production cost of the company which includes the fixed cost and variable cost. Then the total costRead MoreBreak Even Analysis749 Words   |  3 PagesBreak Even Analysis University of Phoenix Accounting in Healthcare ACC561 November 26, 2010 Break Even Analysis Relevance of DRG Analysis as a Tool in Healthcare DRG analysis helps managers in health care determine levels of service at which to operate and to break even as well as avoid any loses. Using the DGR analysis, management will be able to determine the appropriate levels at which to operate making the most of any profits (Steven, David, 2000). The management team ofRead MoreBreak Even Analysis1066 Words   |  5 PagesIntroduction: Break-even analysis is a technique widely used by production management and management accountants. It is based on categorizing production costs between those which are variable (costs that change when the production output changes) and those that are fixed (costs not directly related to the volume of production). Total variable and fixed costs are compared with sales revenue in order to determine the level of sales volume, sales value or production at which the business makesRead MoreCvp Analysis / Break Even Analysis1587 Words   |  7 PagesCVP ANALYSIS / BREAK EVEN ANALYSIS Break-Even Analysis Introduction Break-Even Analysis-Volume-Analysis is a systematic method of examining the relationship between changes in volume (that is output) and changes in Sales Revenue, Express and Net Profit. As a model of these relationships, Break-Even Analysis simpifies the real-world conditions which a firm will face. The objective of Break-Even Analysis is to establish what will happen to the financial results if a specified level of activityRead MoreContribution Margin and Break Even Analysis1636 Words   |  7 PagesMargin and Break Even Analysis. Many factors come into play in determining business success. One of them is the financial factor. For a company to set financial goals it is crucial that its management know in detail the products or services they sale or provide. This is the analysis of two different scenarios at Aunt Connie s Cookies Simulation (University of Phoenix, 2011) and the financial performance of Jamestown Electric Supply Company (Heiter, et. al. 2008). During both analysis I appliedRead MoreBreak Even Analysis Case Study1268 Words   |  6 PagesBreak Even Analysis in Sesuki Mfg. Ltd: A Case Analysis Author: Monika Arora Abstract What-if or sensitivity analysis is one of the most important and valuable concepts in management science (MS). To emphasize its practical relevance in a business environment, we teach students in our introductory MS course to analyze goal seek with Excels built-in Goal seek. This case demonstrates the application of the goal seek tool with several examples. 1. Introduction Sesuki Mfg., Ltd. is a manufacturerRead MoreAcc/561 Cvp and Break-Even Analysis1552 Words   |  7 PagesCVP and Break-Even Analysis ACC/561 - Accounting Wk 5 August 29, 2011 Snap Fitness Snap Fitness, a fitness business based in Minnesota, offers franchise opportunities. The opportunity comes with a start-up fee ranging from $60,000 to $184,000. The following items are included in the start-up fee: 1. Franchise Fee 2. Grand Opening Marketing 3. Leasehold Improvements 4. Utility and Rent Deposits 5. Training Many people dream of owning a business as opposed to working forRead MoreTulsa Memorial Hospital Break-Even Analysis932 Words   |  4 PagesTULSA MEMORIAL HOSPITAL Break-Even Analysis 1. Using the historical data as a guide, construct a pro forma (forecasted) profit and loss statement for the clinics average month for all of 2014 assuming the status quo. With no change in volume (utilization), is the clinic projected to make a profit? -No, the clinic is projected to experience a loss. Pro Forma Average Month: |    |    |    |    |    |    |    | Number of visits |    | 1,350 |    |    |    |    | Net revenue |    | $54,888 | Read MoreBreak Even Analysis For A Company s Breakeven Point1326 Words   |  6 Pages Break even analysis A company s breakeven point is the point at which its sales exactly cover its expenses. Break-even point refers to the revenues needed to cover a company s total amount of fixed and variable cost during a specified period of time (accountingcoach, 2016) Breakeven point= Fixed Costs à · (Price - Variable Costs) Break-Even Analysis [Date]  © 2009 Vertex42 LLC HELP For the Period: Jan 1, 2009 - Jun 30, 2010 Edit the highlightedRead MorePricing, Break-Even, and Marginal Analysis, Essay examples595 Words   |  3 PagesActivity 7.4 * Answer questions from  Appendix 2, sections on  Pricing, Break-Even, and Marginal Analysis, page A-11 through A-16, answer questions 1.1, 1.2, 1.3, 1.4 and 1.5 from page A-16. * Show the formulas used to calculate the answers for these questions. 1.1: Sanborn, a manufacturer of electric roof vents, realizes a cost of $55 for every unit it produces. Its total fixed costs equal $2 million. If the company manufactures 500,000 units compute the following: a) unit cost-