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

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Introduction

Demonstrate the impact of changing cost and revenue data on the breakeven point of a selected business 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 �150. The Variable costs stay the same in the two sheets, but the total costs are different. ...read more.

Middle

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 �1.75, in the original table the variable cost was �1.50. 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 -------- �3.00- �1.75= �1.25 The break even point is �960 No of Customers Fixed costs Variable Costs �1.75 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 ...read more.

Conclusion

The original revenue was �3.00, but the table above is �3.50. 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 ------- �3.50- �1.50= �2.00 The breakeven point is �600 No of Customers Fixed costs Variable Costs Total Costs Revenue �2.70 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 �2.70. 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. 1200 -------- 2.70- 1.50= 1.20 The break-even point is 1000 1 Caroline McCarthy 12 F ...read more.

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