Break-even Analysis Part 2 Changing the Spreadsheet

1. Break-even Analysis Part 2 Changing the Spreadsheet

2. Change in the original problem To publish or not to publish… (it is not over yet…) Through skillful negotiation Babson Press got a reduction in the price of paper from its supplier. Consequently, the estimated variable cost of $10 for each copy printed was brought down to $9.75. How does this change affect the previous solution, assuming that the fixed costs ($3,000) and selling price per unit ($16) remain the same?

3. Changing the Worksheet start with a prepared worksheet NOTE: Refer to the Power Point Presentation Break Even Analysis - Part 1 - Constructing a Spreadsheet

4. Changing the Worksheet modify the variable cost NOTE: Recall that the blue cells (C1:C4) indicate that the same spreadsheet can be used to analyze different instances of the problem by just modifying their contents NOTE: Cells C4:H23 where automatically recalculated to reflect the change in the the variable cost v Click on cell C1 Type 9.75 Enter

5. Changing the Worksheet modify the variable cost Negative profit (loss) Babson Press will break evenif it printssomewhere between 450 and 500 copies Positive profit QUESTION: What can you do to get a more precise break even quantity? NOTE: The break even quantity is not listed on the table

6. Changing the Worksheet modify the quantity increment NOTE: Cells C4:H23 where automatically recalculated to reflect the change in the the quantity increment q_incr Click on the blue cell C4 Type 10 Enter

7. Changing the Worksheet modify the quantity increment QUESTION: What else can you do if the break even quantity is still not listed on the table?

8. Changing the Worksheet modify the initial quantity NOTE: Cells C4:H23 where automatically recalculated to reflect the change in the the initial quantity for variable q NOTE: From this point on, cell E3 will be colored blue to indicate that its value can be modified Click on cell E3 containing the initial quantity Type 400 Enter

9. Babson Press can print & sell 480 books at a cost of $ 7,680 with revenue of $ 7,680 and a profit of $ 0 Babson Press will break even if it prints 480 copies Changing the Worksheet interpret the table NOTE: You might need to adjust the initial quantity (blue cell E3) and the quantity increment (blue cell C4) several times before obtaining the break even quantity with a required precision QUESTION: How can we use graphs to perform Break Even Analysis?