Break-even Point Analysis for the Skirt Assignment | Online Assignment

Assignment 1: Product Breakeven Point (for SKIRT) As a building block for your final project, consider this week the computation of the breakeven point and output level needed to achieve a target level of operating income. Write a 3-page paper on your proposed company’s cost structure. You will need to identify the product, indicate the unit selling price, variable costs, the contribution margin, the total fixed costs (list these by category) and calculate the preliminary breakeven point for your company. When identifying the costs, you must support your cost classifications and the reasonability of your selling price. Supporting research or articles are required. You will need to calculate several formulas (in Excel) to determine the break-even point of your product. Breakeven in units = Fixed costs/Contribution Margin per unit>>> Contribution margin per unit = Sales price per unit – Variable cost per unit My recommendation is to first identify all of your fixed costs (in total) and all of your variable costs (per unit) on your Excel spreadsheet. Variable costs defined in your textbook: costs that change in direct proportion with a change in volume within the relevant range of activity. Examples are direct materials, direct labor, and other direct costs. Variable costs increase with each unit of product manufactured; an example is one steering wheel cost $100 per each car manufactured. Fixed costs defined in your textbook: costs that are unchanged (fixed) as volume changes within the relevant range of activity. Examples are overhead such as utilities, sales commissions, and indirect materials such as glue or nails. Total costs = Fixed costs + variable costs (all costs are identified as either fixed or variable

Assignment 1: Product Breakeven Point (for SKIRT)

As a building block for your final project, consider this week the computation of the breakeven point and output level needed to achieve a target level of operating income. Write a 3-page paper on your proposed company’s cost structure. You will need to identify the product, indicate the unit selling price, variable costs, the contribution margin, the total fixed costs (list these by category) and calculate the preliminary breakeven point for your company. When identifying the costs, you must support your cost classifications and reasonability of your selling price. Supporting research or articles are required.

You will need to calculate several formulas (in Excel) to determine the break-even point of your product.

Breakeven in units = Fixed costs/Contribution Margin per unit>>> Contribution margin per unit = Sales price per unit – Variable cost per unit

My recommendation is to first identify all of your fixed costs (in total)  and all of your variable costs (per unit) on your Excel spreadsheet.

Variable costs defined in your textbook: costs that change in direct proportion with a change in volume within the relevant range of activity.  Examples are:  direct materials, direct labor and other direct costs.  Variable costs increase with each unit of product manufactured; example is one steering wheel cost $100 per each car manufactured.

Fixed costs defined in your textbook: costs that are unchanged (fixed) as volume changes within the relevant range of activity.  Examples are overhead such as utilities, sales commissions and indirect materials such as glue or nails.

Total costs = Fixed costs + variable costs (all costs are identified as either fixed or variable)