Break-even analysis is one of the most fundamental tools for managing any type o
ID: 2556802 • Letter: B
Question
Break-even analysis is one of the most fundamental tools for managing any type of business unit. Consider the management of the corporation that you've been researching and brain storm some some applications of break-even analysis at that corporation. Identify two areas where break-even analysis may be used. For each area, identify the revenues, variable costs, and fixed costs that would be used in the calculation.
Annual Income Statement (values in 000's) Period Ending Current Assets Get Quarterly Data Trend 12/31/2017 12/31/2016 12/31/2015 12/31/2014 Cash and Cash Equivalent $4,713,000 $3,245,000 $1,823,000 $4,848,000 Short-Term Investments $0 $0 $0 $10,000 Net Receivables ???$918,000 $732,000 $679,000 $659,000 $46,000 Inventory $49,000 $128,000 $123,000 Other Current Assets $843,000 $804,000 $757,000 Total Current Assets $6,520,000 $4,830,000 $3,387,000 $6,541,000 Long-Term Assets Long-Term Investments Fixed Assets $0 $0 $0 $9,000 ???$294,000 $258,000 $189,000 $157,000 Goodwill $9,763,000 $9,768,000 S7,095,000 S7,086,000 Intangible Assets $1,192,000 $1,912,000 $562,000 $500,000 Other Assets $440,000 $401,000 $3,738,000 $85,000 Deferred Asset Charges $459,000 $283 $275,000 $264,000 Total Assets ????$18,668,000 $17,452,000 $15,246,000 $14,642,000Explanation / Answer
Operating Break-even point in $= Fixed costs/Contribution margin ratio where, Contribution margin ratio= (Revenues-Variable costs)/Revenues So, we calculate opg. BEP in $ for various years as follows: 12/31/2017 2016 2015 2014 1.Fixed costs (Operating Expenses) 3207000 2802000 1760000 1700000 2.Total Revenues 7017000 6608000 4664000 4408000 3.Variable costs (Cost of Revenue) 2501000 2394000 1585000 1525000 4.$ Contribution (2-3) 4516000 4214000 3079000 2883000 5.Contribution margin ratio (4/2) 0.6436 0.6377 0.6602 0.6540 6.BEP in $(1/5) 4983064 4393834 2666008 2599237 So, we find BEP in $ has consistently increased over the years 2014 to 2017
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