Question

break even analysis create excel template !! Present me a viable business idea with their respective calculations for a break even analysis. Word deliverable and power point presentation

Answer 1

Let us open a retail garment store in a market place which is situated within the metro city. Since the store will be open in a established market, there will be perfect competition to be the dealt by the business. As a promotional strategy, the store will try to keep the price of the garments as low as possible. So during the initial stage, the target will be to increase the market share rather than earning profit. As a result, the management has decided to set the price of the garments at a level which only covers the cost and does not provide any profit. This means there will be no profit after deducting all the expenses. Let us make the calculation by taking the price of one of the garments to be sold in the store.

The management has decided to set the price of the garment at $25. The variable cost of each unit is $15 and the total fixed cost is $50,000. How much garments does the store needs to sell in order to cover all the fixed and variable expenses only and without earning any net profit.

Contribution per unit = Sales - Variable cost

                                  = 25 - 15

                                   = 10

Break-even Sales in units = Fixed Cost/Contribution per unit

                                          = 50000/10

                                          = 5,000

The stores needs to sell 50,00 units to breakeven i.e., it will cover all the fixed and variable expenses only and there will be no profit left after it. So if the management wants to set the selling price at $25 then it has to sell at least 5,000 units to cover all the expenses.

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