Comprehensive Report: Break-Even Analysis and Budgeting Methods

This report provides a comprehensive analysis of break-even points and budgeting strategies for a business. It calculates the break-even point based on fixed costs, selling price per unit, and variable costs, determining the number of units needed to be sold to cover all costs. The report also estimates the time required to reach the break-even point and discusses methods for covering costs until that point is achieved, such as reviewing major costs, exploring commission-based salaries, deferring non-essential costs, and utilizing social media to cut expenses. The report references various sources to support its analysis and recommendations.

BREAK EVEN AND BUDGETING
BREAK EVEN AND BUDGETING
NAME OF STUDENT
NAME OF UNIVERSITY

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BREAK EVEN AND BUDGETING
PART 1.
The breakeven point according to Schmidt (2019), is the point which cash outflow equal cash
inflows. It is a measure of the number of units a business must sell to cover costs.
The costs for the business are made up as follows in the table below.
Table 1.
Selling Price per unit 245.00
Variable cost per unit (4+2.55) 6.55
Fixed Costs 213,575.00
*Attached is the excel with the monthly trends.
Break even= Fixed costs/ (selling price-variable cost)
=213,575/ (245-6.55)
=897 people or card
The company will only achieve break even if it sells cards to 897 people, Murray (2018).
PART 2.
The time it will take to break even is determined by how long it will achieve sales for the break even.
The sales units required are 896 while the company is achieving 235 sales per year. This translated to
3.8 years. However, this is not realistic as each year will attract almost the same costs as the
company does not have significant fixed assets or costs committed on long term assets Bragg (2019).
Another way to achieve this is to increase the current sales levels which will increase the variable
cost.
PART 3
The options for covering costs till the company breaks even are reviewing the major costs like payroll
and explore commission-based salaries or outsourcing to cheaper sources. Another method is to
defer costs like some subscriptions which are not important. Using social media and virtual
technology can also cut significant costs, Scuderi (2012).

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BREAK EVEN AND BUDGETING
References
Bragg, S (2019). Break-Even Point Analysis From Fixed and Variable Costs ,Retrieved from
https://www.business-case-analysis.com/break-even-analysis.html#simple-break-
even ,(Accessed on 7 February ;2019).
Schmidt, M (2018). Accounting Tools, The difference between gross margin and operating
margin, Retrieved from https://www.accountingtools.com/articles/the-difference-
between-gross-margin-and-operating-margin.html ,(Accessed on 7 February ;2019).
Scuderi, R (2012). 10 Simple Ways to Cut Business Costs.
, Retrieved from https://www.americanexpress.com/en-us/business/trends-andinsights/
articles/10-simple-ways-to-cut-business-costs/ ,(Accessed on 7 February ;2019).
Murray, J (2018). 5 Easy Steps to Creating a Break-even Analysis
, Retrieved from https://www.thebalancesmb.com/how-to-do-a-break-even-analysis-
398032 ,(Accessed on 7 February ;2019).