Terminology Assignment
It is very important to understand various terms associated with the calculation of break-even. Let’s practice understanding this terminology by assuming that you own a dog grooming business. You will use the dog grooming service as a basis when answering the following questions; this assignment does not pertain to the health care business that you are creating for this class:
1. Research the concept of break-even point. Why is it important for you to know how many dogs must be groomed each week in order for you to reach your break-even point? What would be the effect if you did not know this number?
2. Research the concept of fixed costs. Give two examples of fixed costs for your dog grooming service.
3. Research the concept of variable costs. Give two examples of variable costs for your dog grooming service.
4. How are the fixed costs and the variable costs in your business affected by changes in productivity levels? What might you do to reduce both the fixed and variable costs as the owner of the dog grooming service?