# BREAK-EVEN ANALYSIS OF MCDONALDS

BREAK-EVEN ANALYSIS OF MCDONALDS

INTRODUCTION

Break-even analysis is the comparison of a firm’s revenue and it fixed and variable costs, to identify the minimum sales level needed to achieve break even point. Break-even point is the level of output at which total revenue equals total cost.

A business to achieve break-even is so important. A business usually fail down because put all the money in, and can’t get the money back in the short term of time, which they can cost the cost. Break-even is an important objective of a business to survive in the short term.

To break-even, that means the revenue needs to cover all the cost of the business, which is variable cost and fixed cost. The revenue is means the money which make from to sell the products. Variable cost is means the cost that directly go to make each product. For example raw material, and staff wages.  It call variable cost is because they are depend on how many product are produce. Fixed cost is the cost of running the business, it doesn’t affect by how many product are produce. Fixed cost include the rent of the shop, business taxes, fuel bill, insurance, staff salary etc. The business revenue is needed to cover the fixed cost or it will make a loss.

BREAK-EVEN OF MCDONALD

Calculate Break-even point, can either show on a chart or use equation

Equation : Break-even = Fixed cost/ contribution

Contribution= sale price – variable cost

I get the data to calculate break-even of McDonald, which show as below:

Average selling price of product: £1.50

Average variable cost of a product: £0.4

Fixed costs in an average outlet per annum: £1 000 000

Now I calculate the break even point by the equation:

Contribution: £1.50- £0.40= £1.1

Break-even: £1 000 000/ £1.1= 909091

That show McDonald need to sell 909091 products in a year to make the break-even. And it can also show as chart:

There is the break even chart next page:

AIM AND OBJECTIVE OF MCDONALD

McDonald's aim ...