Break Even Analysis

To: YouFrom: Danny Wilco <mailto:dwilco@ebbd.comdwilco@ebbd.com>Subject: Re: loading dock area decisionI just wanted to keep you informed of the how this project is moving along. We have begun to discuss our options with several vendors and construction companies. We are in the process of determining the specifications for the automated system, and we are developing preliminary plans and specs for expanding the loading dock area. We will be asking for final specs and quotations shortly. As soon we get this information, I will send it along with the details of your assignment.~DW, VP LogOps.————————————Learning Wizard CASE 5 RESOURCESProductivity can be analyzed in terms of a breakeven analysis. But there are two general ways to consider Breakeven. The first way is based on a product and its price, costs, and volumes, which is a special case of Cost-Volume-Profit analysis. This method utilizes the profit equation:Profit = Price * Volume – Variable Costs * Volume – Fixed Costs.Note that Price and Variable Costs are both on a per unit basis. To determine the breakeven point, profit is set equal to zero, and the equation is solved for Volume.BE = (Fixed Costs) / (Price – Variable Costs)The second method of doing breakeven analysis is to compare alternatives that have Fixed Costs and Variable costs and determine the volume at which these total costs for each is equal to zero.Fixed Costs[a] + Variable Costs[a] * Volume = Fixed Costs[b] + Variable Costs[b] * VolumeNote that Variable Costs are on a per unit basis. Solving for the BE volume:BE = (Fixed Costs[a] – Fixed Costs[b]) / (Variable Costs[b] – Variable Costs[a])Download this PowerPoint that provides more details and examples. [BreakevenPPT]After reviewing the examples in the PowerPoint, download this Excel file that has the examples along with the exercises for you practice. [BreakevenCalc]. You can use this Excel Breakeven Calculator for the Case 5 problem.Once you have mastered these…