The student is requested to select a very simple business, one with a single pro

Question

The student is requested to select a very simple business, one with a single product. Some possibilities are:

A child’s lemonade stand

A retail DVD rental store

A coffee shop

A retail store selling compact discs

An athletic shoe store

A cookie stand in a mall

However, you are encouraged to use your imagination rather than just select one of these examples. After, please complete the following tasks:

Make a list of all fixed costs associated with running the business you selected. Estimate the amount of each fixed cost per month (on per day or per year, if one of them is more appropriate for your business).

Make a list of all variable costs associated with making or obtaining the product or service your company is selling. Estimate the cost per unit for each variable cost.

Imagine a selling price and calculate contribution margin. With the fixed and variable costs you have identified, compute the break-even point for your business in either units or dollar sales.

Assess the prospects of your business making a profit.

Explanation / Answer

a dvd Retail Store Expected Sales (DVD) Per Year A                8,000 Selling Price Per unit B                      60 Variable Cost Per Unit C                      30 Sales Value D=A*B          4,80,000 Variable Cost E=A*C          2,40,000 Contribution F=D-E          2,40,000 Fixed Cost G          1,25,000 Contribution Per Unit H=B-C                      30 Break even Point P/V Ratio=Total contribution/Sales I=F/D 50.00% Break Even Point=Fixed Cost/(P/V Ratio) J=G/I          2,50,000 Break Even Point (Units) K=J/B                4,167 Company prospectus is good as it will achive its BEP at 52% (4167/8000) of the current sales

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