Break-even analysis and customer lifetime value Based on the information show below: Costs Make Option Buy...

Break-even analysis and customer lifetime value

Based on the information show below:

Costs	Make Option	Buy Option
Fixed Cost	$100,000	$10,000
Variable Cost	$10	$20

Find the break-even quantity and the total cost at the break-even point.
If the requirement is 15,000 units, is it more cost-effective for the firm to buy or make the components?

Expert Solution

At the breakeven point, Total cost for Make option = Total cost for Buy option

(Fixed Cost + Variable cost * X) for Make option = (Fixed Cost + Variable cost * X) for Buy option where X is the breakeven point

100,000 + 10*X = 10,000 + 20*X

X = 9000 units

If the quantity is higher than 9000 units, the option with lesser variable cost is preferable and cost effective i.e. for quantity > 9000, Make option is cost effective.

Similarly, If the quantity is lower than 9000 units, the option with lesser Fixed cost is preferable and cost-effective i.e. for quantity < 9000, Make option is cost-effective.

Since Q = 15000, which is more than 9000 units, Make option is cost-effective.

-----------------------------------------------------------------------------------------------------------------------

In case of any doubt, please ask through the comment section before Upvote/downvote.

keosha answered 6 months ago

2. Cost Volume Profit Analysis or Break Even Analysis You are given the financial information below:...

2. Cost Volume Profit Analysis or Break Even Analysis You are given the financial information below: Tom’s Treasures Income Statement . . .For Year Ended 12/31/17 Sales (85,000 units) . . ... . . .$5,500,000 Variable Expenses . . . . . . .$2,475,000 Contribution Margin . . . . . . . $3,025,000 Fixed Expenses. . . . . . . . . .$1,785.000 Net Operating Income . . . . . . $1,240,000 Additional Formulas Needed: 1. Sales...

Here is a break-even analysis model. Break-even Analysis Revenue Selling Price per unit $20 Costs Fixed...

Here is a break-even analysis model. Break-even Analysis Revenue Selling Price per unit $20 Costs Fixed Costs per unit $210,000 Variable Cost per unit $8 Break-even Point Quantity (Q) 17,500.00 Do the following two tasks. a. Create a strategy table showing how the quantity changes as the selling price varies from $18 to $22. b. Create a strategy table showing how the quantity changes as the selling price varies from $18 to $22 and the variable cost per unit changes...

Break-even analysis attempts to determine the volume of sales necessary for a business to cover costs, or to make revenue equal costs.

BREAK-EVEN ANALYSIS EXERCISEBreak-even analysis attempts to determine the volume of sales necessary for a business to cover costs, or to make revenue equal costs. It is helpful in setting prices, estimating profit or loss potentials, and planning for the coming period.The general formula for calculating break-even units is:Break-even Units = Fixed Costs / Price – Unit Variable Cost1. An important distinction is made in the calculation between fixed and variable costs. Fixed costs do not change with the units sold (at...

What is the maximum profit / loss and break-even for the following option trades? Buy 1...

What is the maximum profit / loss and break-even for the following option trades? Buy 1 XYZ 30 Call @ 2.50 Sell 1 XYZ 25 Call @ 4.00 Buy 1 XYZ 40 Put @ 5.50 Sell 1 XYZ 30 Put @ 2.00

You are given the following information: Costs Make Option Buy Option Fixed Cost SAR 62500 SAR...

You are given the following information: Costs Make Option Buy Option Fixed Cost SAR 62500 SAR 2500 Variable Cost SAR 7.5 SAR 8.5 Find the break-even quantity and the total cost at the break-even point. If the requirement is 75000 units, is it more cost-effective for the firm to buy or make the components? What is the cost savings for choosing the cheaper option?

Break even analysis is at the core of unit costs. Do you believe the fixed costs...

Break even analysis is at the core of unit costs. Do you believe the fixed costs used as a numerator is the best method for this analysis? Why or why not? Answer needs to be over 5 lines, thank so much.

From the information below, calculate the accounting break-even point. Initial investment: $2,000 Fixed costs are $2,000...

From the information below, calculate the accounting break-even point. Initial investment: $2,000 Fixed costs are $2,000 per year Variable costs: $8 per unit Depreciation: $300 per year Price: $25 per unit Discount rate: 10% Project life: 4 years Tax rate: 34%

Support SUPERTEL, a new Telecommunication company, in calculating the Lifetime Value per customer based on the...

Support SUPERTEL, a new Telecommunication company, in calculating the Lifetime Value per customer based on the following assumptions: Perform the necessary calculations (A THROUGH K NEEDS TO BE CALCULATED): Year 1 Year 2 Year 3 Year 4 Year 5 Revenue A Customers 2,000 B Retention rate 30 % 40 % 55 % 65 % 70 % C Average yearly sales $250 $250 $250 $250 $250 D Total revenue Costs E Cost percentage 50 % 50 % 50 % 50 %...

1. Break-even analysis To be profitable, a firm must recover its costs. These costs include both...

1. Break-even analysis To be profitable, a firm must recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit. Consider the case of Petrox Oil Co.: Petrox Oil Co. is considering a project that will have fixed costs of $12,000,000. The...

1. Break-even analysis To be profitable, a firm has recover its costs. These costs include both...

1. Break-even analysis To be profitable, a firm has recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit. Consider the case of Petrox Oil Co.: Petrox Oil Co. is considering a project that will have fixed costs of $15,000,000. The...

Question