Question: Determining the Break-Even Point
Professional: You have been hired by Amy Overhouse, owner of a small start-up company, to create a data table that analyzes the break-even point for a new product she is developing. She would like you to analyze the break-even point for prices ranging from $12.99 to $17.99 per unit, in $0.50 increments. You can calculate the number of units she must sell to break even (break-even point) if you know the fixed expenses, the price per unit, and the expense (cost) per unit. The following formula determines the break-even point: Break-Even Point = Fixed Expenses / (Price per Unit - Expense per Unit) Assume Fixed Expenses = $7,000; Price per Unit = $14.99; and Expense per Unit = $8.00.
Part 1: Use the concepts and techniques presented in this chapter to determine the break-even point and then create the data table. Use the Price per Unit as the input cell and the break-even value as the result. Protect the worksheet so that only cells with data can be selected. Submit the workbook as requested by your instructor.
Part 2: You can calculate additional break-even points by using a two-way table and varying Fixed Expenses or Expense per Unit in addition to Price per Unit. Which of the following provides the owner with a wider range of break-even points: varying Fixed Expenses between $6500 and $7000 in increments of $250 or varying Expense per Unit between $7.60 and $8.00 in increments of $0.20?
Highlight the one with the largest number of break-even points.