Overview
The next step in planning for your new business is to analyze the cost behaviors and systems of your industry and conduct the relevant financial calculations to determine appropriate costing solutions. In this milestone assignment, you will conduct a break-even analysis to determine your target profits and the selling price you plan to use to achieve these profits for each product.
Prompt
Use information from Milestone One and the provided Milestone Two Market Research Data Appendix to conduct a cost-volume profit analysis. Complete the “Contribution Margin Analysis” and “Break-Even Analysis” tabs in the Project Workbook that you used for completing the Milestone One assignment.
Specifically, you must address the following rubric criteria:
- Contribution Margin. Determine your contribution margin per unit in the “Contribution Margin Analysis” tab.
- Choose a sales price for each product.
- Calculate the contribution margin for each product based on your sales price and the variable cost for that product. Show your work using calculations to the side of the table or using appropriate formulas in the table.
- Break-Even Analysis. Use cost-volume-profit (CVP) analysis to determine your break-even points for achieving your target profits in the “Break-Even Analysis” tab.
- Determine the break-even points for each product. Show your work using calculations to the side of the table or using appropriate formulas in the table.
- Determine break-even units for the suggested target profits for each product. Show your work using calculations to the side of the table or using appropriate formulas in the table.
Guidelines for Submission
Submit the Project Workbook with the “Contribution Margin Analysis” and “Break-Even Analysis” tabs completed. This file should be completed and submitted using Microsoft Excel.