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400
401
If P = $20
If P = $40
If P = $80
Questions:
Where do you lose $,
make $ or B-E?
Should you start the
business?
at what price?
at what likely N?
Breakeven Analysis
(P x N) - (V x N) - FC = 0
(P - V) x N - FC
= 0
(P - V) x N
= FC
BE-N = FC
= FC
(P-V)
Unit CM
Multiply both sides of the above equation by P to get the
breakeven revenue:
BE$ = BE-N x P =
FC x 1 = FC = FC
(P-V)
1
(P-V) CM Ratio
P
P
Getting to Breakeven
We know FC = $1,600
Let P = $60.00 and V = $10.00
then the breakeven quantity (in hours) is:
BE-N =
and
BE-$ =
Breakeven:
Firm A
Firm B
50
10
40
340,000
50
35
15
90,000
Revenue
Cost
340,000
B-E Output
Volume
Revenue
Cost
90,000
B - E Output
Volume
Revenue
Cost - B
Cost - A
340,000
90,000
Volume
Margin of Safety
Incremental Analysis
$450
333
$117
$1,250,000
Sales Mix
Sales mix relative combination in which a
companys products are sold
Managers try to maximize overall profit based
on the optimal sales mix
Challenge not all products are equally
profitable
One measure of effectiveness of sales force or
sales strategy is sales mix and its profitability
$80,000
Percent
100
Smart Phone
Amount
$20,000
60,000
10,000
$ 20,000
$10,000
Percent
100
Total
Amount
$100,000
27,000
$______
Percent
100
Percent
100
Smart Phone
Amount
Percent
Total
Amount
100
100
Less: VC
CM
Less: FC
NOI
Percent
27,000
$______
$20,000
Percent
100
Smart Phone
Amount
$80,000
Percent
100
Total
Amount
$100,000
Less: VC
CM
Less: FC
NOI
27,000
$_______
Percent
100
Percent
100
Smart Phone
Amount
Percent
Total
Amount
100
100
Less: VC
CM
Less: FC
NOI
Percent
27,000
$______
No.
Units
Amount
Smart Phone
Per
Unit
Sales
No.
Units
Amount
Total
Per
Unit
No.
Units
Amount
$100,000
$100
$100
75
50
$25
$50
Less: VC
CM
Less: FC
NOI
27,000
No.
Units
Amount
Smart Phone
Per
Unit
No.
Units
Amount
Total
No.
Units
Per
Unit
Amount
Sales
$100
$100
75
50
$25
$50
Less: VC
CM
Less: FC
NOI
$27,000