Application: Break-Even Analysis
When expenses and revenues are equal, this is known as the "break-even point" or BEP. To determine break-even, an examination of fixed and variable costs (expenses) in relationship to revenues is necessary. Understanding where the BEP is for a given product or service helps managers determine how to make modifications to increase profitability.
For this Assignment, review this week's Media, the Weekly Briefing, and P2-41: Happy Feet in Chapter 2 of your course text. Based on the information provided in your course text, consider the importance of BEP for the scenario presented. Reflect on the importance of the BEP and how this influences decision making for organizations.
The Assignment:
Part 1: Calculate the break-even point for Happy Feet under each of the two different scenarios using a spreadsheet program such as Excel. Be sure to apply the appropriate accounting process to determine the break-even points.
Part 2: Recommend which option, based on the scenarios for Happy Feet, that you would select using a word processing program such as Word. Support your conclusion with both a written analysis and quantitative data.