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# break-even chart

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The level of fixed costs (salaries, rent, and utilities) necessary to run my coffee shop on a monthly basis is \$9,000. In addition, a cup of coffee sells for \$1.25 costs \$0.25 for the bulk coffee, filters, and water.
The contribution margin of a cup of coffee is, therefore, \$1.00. I can now calculate how many cups of coffee I have to sell to cover my fixed costs:
Break-Even = (Fixed Costs) / (Contribution Margin)
= \$9,000/\$1.00 = 9,000 cups of coffee per month
I will also offer gourmet coffees, which cost \$0.50 per cup to brew, at \$2.00 per cup. I will also offer baked goods, which cost \$0.30, each, at \$1.30. The break-even calculation is now indeterminate, that is, there are an infinite number of solutions without making some additional assumptions.
I will assume that two-thirds of my coffee sales will be regular coffee (call the number of cups R, the remaining third, gourmet coffee, G). I will further assume that half of all coffee purchasers also buy a pastry (P):
Contribution Margin (CM) = CM for each product * Units sold
= \$0.75*R + \$1.50*G + \$1.00*P
But G is half of R,
and P is half of R and G
combined: = \$0.75*R + \$1.50*(R/2) + \$1.00*(R+G)/2
relating entirely to R: = \$0.75*R + \$0.75*R + \$1.00* (R+(R/2))/2
combining and simplifying: = \$1.50*R + \$1.00*(3*R/4)
= \$1.50*R + \$0.75*R = \$2.25*R
Since this must equal fixed costs at break-even: \$2.25*R = \$9000; R = 4000
Relating back to my assumptions, each month I must sell 4000 cups of regular coffee, 2000 cups of gourmet coffee, and 3000 pastries.
Create a break-even chart and do cost-plus pricing (price = unit cost/1 minus target rate of return) on regular coffee, gourmet coffee, and pastries combined.

https://brainmass.com/economics/break-even-analysis/break-even-chart-230624

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A break-even chart is formulated.

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## Calculating Break-Even Volume and Creating Break-Even Chart

Peter, a president of a company produces power transformers for personal computer manufacturers. Peter's choice of the various methods by which a new model of transformer can be built has been narrowed to 3 choices. He estimates the product life of the transformer to be one year. Marketing has estimated that it can sell 5,000 of these new transformers within the time period. The 3 alternatives are:

1. Use existing equipment and fixtures, and hire high
-skilled machinists and technicians at \$16.00 per hour (including benefits). With this method, each transformer will require 2 labor hours to assemble.

2. Use existing equipment, but invest \$30,000 in new fixtures and instruction manuals to simplify some of the more complicated operations. Semiskilled workers can be employed at \$12.00 per hour (including benefits), with each transformer requiring 1 labor hour to complete.

3. Invest \$75,000 in new equipment, fixtures, and instruction manuals. This approach would eliminate all of the complicated procedures, thereby requiring only unskilled labor, which could be hired for \$6.00 an hour (including benefits). With this method, each transformer would require 20 labor minutes to complete.

These are the questions that I am completely lost on. I have to do this in Excel.

A. Make a break-even chart using total cost versus volume for the above processes.

B. Calculate the 2 break-even volumes (i.e., those volumes at which you shift from one process to another).

C. Which alternatives would choose and why?

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