Demonstrate the impact of changing cost and revenue data on the breakeven point of a selected business Essay Example

Demonstrate the impact of changing cost and revenue data on the breakeven point of a selected business Essay Example Demonstrate the impact of changing cost and revenue data on the breakeven point of a selected business Essay Demonstrate the impact of changing cost and revenue data on the breakeven point of a selected business Essay Breakeven analysis can also be used to show how risky a business might be if the revenues or costs are not as originally predicted. Mia has considered a range of alternative scenarios where the cost and revenue are different to her original figures. Changes in fixed costs No of Customers Fixed costs Variable Costs Total Costs Revenue Profit/ Loss 0 1350 0 1350 0 (1350) 2000 1350 3000 4350 6000 1650 4000 1350 6000 7350 12000 4650 6000 1350 9000 10350 18000 7650 8000 1350 12000 13350 24000 10650 10000 1350 15000 16350 30000 13650 12000 1350 18000 19350 36000 16650 14000 1350 21000 22350 42000 19650 16000 1350 24000 25350 48000 22650 18000 1350 27000 28350 54000 25650 In the table above I can see the fixed costs have increased to 1,350. The fixed costs in the original sheet were 1,200. The differences between the two sums are à ¯Ã‚ ¿Ã‚ ½150. The Variable costs stay the same in the two sheets, but the total costs are different. In the original sheet the total cost of 2000 customers is à ¯Ã‚ ¿Ã‚ ½4200, but in this sheet the total is à ¯Ã‚ ¿Ã‚ ½4350. The revenue stays the same for both sheets but the last column (profit/loss) will change. On the original sheet the profit/ loss for 6000 customers is 7800, whereas this sheet is 7650. The break even formula is Fixed cost (Selling price- Variable costs per unit) 1350 - à ¯Ã‚ ¿Ã‚ ½3.00 à ¯Ã‚ ¿Ã‚ ½1.50 = à ¯Ã‚ ¿Ã‚ ½1.50 The breakeven point is à ¯Ã‚ ¿Ã‚ ½900 No of Customers Fixed costs Variable Costs Total Costs Revenue Profit/ Loss 0 1125 0 1125 0 (1125) 2000 1125 3000 4125 6000 1875 4000 1125 6000 7125 12000 4875 6000 1125 9000 10125 18000 7875 8000 1125 12000 13125 24000 10875 10000 1125 15000 16125 30000 13875 12000 1125 18000 19125 36000 16875 14000 1125 21000 22125 42000 19875 16000 1125 24000 25125 48000 22875 18000 1125 27000 28125 54000 25875 In the table above I can see the fixed cost have decreased to à ¯Ã‚ ¿Ã‚ ½1125 per month, in the original sheet it was à ¯Ã‚ ¿Ã‚ ½1200 pounds and has decreased by à ¯Ã‚ ¿Ã‚ ½75. The variable costs and the revenue are the same as originally predicted but the total cost and the profit/ loss has changed a lot. The total cost on the original sheet for 16000 customers was 25200 and the total cost for 16000 customers when the fixed cost is 1125 is 24000 pounds. The profit/ loss for the original, is for 8000 customers the profit is 10800 and for my new table my profit/ loss for 8000 customers is 10875. The break even calculation is: 1125 à ¯Ã‚ ¿Ã‚ ½3.00 à ¯Ã‚ ¿Ã‚ ½1.50= à ¯Ã‚ ¿Ã‚ ½1.50 The break even point is à ¯Ã‚ ¿Ã‚ ½750 No of Customers Fixed costs Variable Costs à ¯Ã‚ ¿Ã‚ ½1.75 Total Costs Revenue Profit/ Loss 0 1200 0 1200 0 (1200) 2000 1200 3500 4700 6000 1300 4000 1200 7000 8200 12000 3800 6000 1200 10500 11700 18000 6300 8000 1200 14000 15200 24000 8800 10000 1200 17500 18700 30000 11300 12000 1200 21000 22200 36000 13800 14000 1200 24500 25700 42000 16300 16000 1200 28000 29200 48000 18800 18000 1200 31500 32700 54000 21300 Changes In variable costs In the graph above the variable costs have increased to à ¯Ã‚ ¿Ã‚ ½1.75, in the original table the variable cost was à ¯Ã‚ ¿Ã‚ ½1.50. The fixed cost and the revenue is the same as the original, but the total cost and profit/ loss is different. In the original table the total cost for 18000 customers was 28200 and the total cost in the table above for 18000 customers is 32700. There is a big difference in the table above compared to the original. 1200 à ¯Ã‚ ¿Ã‚ ½3.00- à ¯Ã‚ ¿Ã‚ ½1.75= à ¯Ã‚ ¿Ã‚ ½1.25 The break even point is à ¯Ã‚ ¿Ã‚ ½960 No of Customers Fixed costs Variable Costs à ¯Ã‚ ¿Ã‚ ½1.75 Total Costs Revenue Profit/ Loss 0 1200 0 1200 0 (1200) 2000 1200 3500 4700 6000 1300 4000 1200 7000 8200 12000 3800 6000 1200 10500 11700 18000 6300 8000 1200 14000 15200 24000 8800 10000 1200 17500 18700 30000 11300 12000 1200 21000 22200 36000 13800 14000 1200 24500 25700 42000 16300 16000 1200 28000 29200 48000 18800 18000 1200 31500 32700 54000 21300 No of Customers Fixed costs Variable Costs à ¯Ã‚ ¿Ã‚ ½1.40 Total Costs Revenue Profit/ Loss 0 1200 0 1200 0 (1200) 2000 1200 2800 4000 6000 2000 4000 1200 5600 6800 12000 5200 6000 1200 8400 9600 18000 8400 8000 1200 11200 12400 24000 11600 10000 1200 14000 15200 30000 14800 12000 1200 16800 18000 36000 18000 14000 1200 19600 20800 42000 21200 16000 1200 22400 23600 48000 24400 18000 1200 25200 26400 54000 27600 In the table above the fixed cost is the same as the original, but the variable cost has decreased to à ¯Ã‚ ¿Ã‚ ½1.40. The revenue is the same as original but the total costs and profit/ loss is different. On the original sheet the total cost for 6000 customers is à ¯Ã‚ ¿Ã‚ ½10200 and in the table above at 6000 customers the total cost is 9600. So the difference between the two is 600. The profit/ loss on the original sheet are lower than the table above because on the original sheet at 10000 customers the profit/ loss are 13800, and on the table above the profit/ loss are at 14800. So the difference is 1000. 1200 - à ¯Ã‚ ¿Ã‚ ½3.00- à ¯Ã‚ ¿Ã‚ ½1.40= à ¯Ã‚ ¿Ã‚ ½1.60 So the breakeven point is 750. Changes in Revenue No of Customers Fixed costs Variable Costs Total Costs Revenue à ¯Ã‚ ¿Ã‚ ½3.50 Profit/ Loss 0 1200 0 1200 0 (1200) 2000 1200 3000 4200 7000 2800 4000 1200 6000 7200 14000 6800 6000 1200 9000 10200 21000 10800 8000 1200 12000 13200 28000 14800 10000 1200 15000 16200 35000 18800 12000 1200 18000 19200 42000 22800 14000 1200 21000 22200 49000 26800 16000 1200 24000 25200 56000 30800 18000 1200 27000 28200 63000 34800 The table above shows a change in the revenue. The original revenue was à ¯Ã‚ ¿Ã‚ ½3.00, but the table above is à ¯Ã‚ ¿Ã‚ ½3.50. The fixed and variable costs are the same as the original, but the Revenue is different. The profit/ loss are different because in the original table at 14000 customers the profit/ loss are 19800 and in the table above the profit/ loss for 14000 customers are 26800. 1200 - à ¯Ã‚ ¿Ã‚ ½3.50- à ¯Ã‚ ¿Ã‚ ½1.50= à ¯Ã‚ ¿Ã‚ ½2.00 The breakeven point is à ¯Ã‚ ¿Ã‚ ½600 No of Customers Fixed costs Variable Costs Total Costs Revenue à ¯Ã‚ ¿Ã‚ ½2.70 Profit/ Loss 0 1200 0 1200 0 (1200) 2000 1200 3000 4200 5400 1200 4000 1200 6000 7200 10800 3600 6000 1200 9000 10200 16200 6000 8000 1200 12000 13200 21600 8400 10000 1200 15000 16200 27000 10800 12000 1200 18000 19200 32400 13200 14000 1200 21000 22200 37800 15600 16000 1200 24000 25200 43200 18000 18000 1200 27000 28200 48600 20400 The table above has a revenue of à ¯Ã‚ ¿Ã‚ ½2.70. The fixed and variable costs are the same as the original table. The revenue is different so at 8000 customers the original the revenue is 24000, and on the table above at 8000 customers the revenue is 21600.