Breakeven Problems-MBA638.doc
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Tiffin University *
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MBA638
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Industrial Engineering
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Dec 6, 2023
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docx
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Uploaded by JusticeWater5876
MBA638: BREAKEVEN ANALYSIS EXERCISES
Problem #1: 15 points
Problem #2: 15 points
Total Points: 30 points
#1. Break-even Analysis Exercise-Planes
YOU MUST SHOW YOUR CALCULATIONS TO RECEIVE POINTS
Step 1:
An airplane company has $100 million in fixed costs and variable costs per unit of $2 million. Planes sell on average for $3 million each. What is the company’s breakeven point in terms of the number of planes that need to be sold to break even? (5 points)
100,000,000
3,000,000 – 2,000,000
100,000,000
1,000,000
= the company needs to sell 100 planes to break even
Step 2:
If the airplane company wants to make $99 million profit, how many planes will it have to sell? (5 points)
100,000,000+99,000,000 = 199,000,000
3,000,000−2,000,000 = 1,000,000
199,000,000 / 1,000,000 = 199 Number of planes to sell
Step 3:
If the company can sell 200 planes, how much profit will the firm make? (5 points)
Total Revenue = $3,000,000 * 200 = $600,000,000
Total Costs = $100,000,000 + ($2,000,000 * 200) = $100,000,000 + $400,000,000 = $500,000,000
Profit = $600,000,000 - $500,000,000 = $100,000,000
If the company sells 200 planes, it will make a profit of $100 million.
#2. Break-even Analysis Exercise-Autos
YOU MUST SHOW YOUR CALCULATIONS TO RECEIVE POINTS
Step 1:
An automotive car dealership has $150,000 in fixed costs and variable costs per unit of $35,000. Cars sell on average for $50,000 each. What is the company’s breakeven point
in terms of the number of cars that need to be sold to break even? (5 points)
150,000
50,000 – 35,000
150,000
15,000
= the company needs to sell 10 cars to break even.
Step 2:
If the automotive dealership wants to make $125,000 profit, how many cars will it have to sell? (5 points)
150,000+125,000
50,000 – 35,000
275,000
15,000
= 18.33 Number of cars to sell
Step 3:
If the company can sell 30 cars, how much profit will the firm make? (5 points)
Total Revenue = $50,000 * 30 = $1,500,000
Total Costs = $150,000 + ($35,000 * 30) = $150,000 + $1,050,000 = $1,200,000
Profit = $1,500,000 - $1,200,000 = $300,000
If the company sells 30 cars, it will make a profit of $300,000.
RUBRIC: 30 POINTS
ITEMS
SCORE
POINT
S
Exercise 1: step 1
5
Exercise 1: step 2
5
Exercise 1: step 3
5
Exercise 2: step 1
5
Exercise 2: step 2
5
Exercise 2: step 3
5
TOTAL POINTS
30
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