Implementation / plan of action:

The business needs a financial investment before the business starts its works in most of the cases. When the works begins, it
may take time and many sales before the business achieves profitability. Even when the business doesn’t works much and is with
a loss but yet the business can earn profit through business’s break-even point.

Break-even Point

All of its fixed assets and expenses can be covered as the business’s sales have generated enough income is called as break-even
point. Until and unless there is no increase in the expenses and cost and reduction in the sales amounts, all the business incoming
revenue is with profit at this point.

The break-even point can be calculated as to divide the business fixed expenses by its margin. We need to subtract the business’s
total variable expenses from its total sales amount then only we can determined the margin of the business. The margin shows the
percentage of revenue that maintains after the business pay offs all of its expenses. The total profits after expenses represents the
margin of the business. We need to add the business’s total costs of goods sold to the selling expenses to get the business’s total
variance expenses. The business income statement is required to determine the business’s break-even point , earning statement or
profit and loss statement is also referred to calculate the business break-even point.

The financial resources such as fixed costs and variable costs are required in order to calculate breakeven point and it is long term
tasks to guide the implementation process.

Case 1: Price $499 Case 2: Price $799 Case 3: Price 1099

Revenue: 2000*499=998000 Revenue: 2000*799=1598000 Revenue: 2000*1099=2198000
Expenses: Expenses: Expenses:
Fixed expenses: 105000 Fixed expenses: 105000 Fixed expenses: 105000
COGS: 50% of 499 i.e. $249.50 COGS: 50% of 799 i.e. $399.50 COGS: 50% of 1099 i.e. $549.50
249.50*2000=499000 399.50*2000=799000 549.50*2000=1099000
Variable expenses: Variable expenses: Variable expenses:
Direct Material: 45000 Direct Material: 45000 Direct Material: 45000
Direct labor: 280000 Direct labor: 280000 Direct labor= 280000
Net profit=Revenue-Expenses Net profit=Revenue-Expenses Net profit=Revenue-Expenses
=998000-929000=69000 =1598000-1229000=369000 =2198000-1529000=669000

Recommendation/ Your best solution:

The break-even point identifies the total amount of sales the business needs before profit can be earned. When
analyzed closely, the break-even analysis also helps the business to identify excessive fixed costs. Since the break-
even point is directly related to the fixed costs, reducing and controlling these costs aids the business in achieving a
lower break-even point for quicker profitability.