Free Break Even And Profit Volume Cost Analysis Template

Break Even and Profit Volume Cost Analysis

Prepared By :

[Your Name]

Department :

[Your Department]

Company :

[Your Company Name]

Company Address:

[Your Company Address]

Company Social Media:

[Your Company Social Media]

I. Introduction

In this Break Even And Profit Volume Cost Analysis, we aim to analyze the financial viability of launching a new product line. This analysis will assist the management team at [Your Company Name] in understanding the point at which revenue equals total costs and forecasting profits at various levels of sales.

II. Cost Analysis

A. Fixed Costs

Cost Category

Monthly Cost ($)

Rent for facility

$10,000

Salaries for staff

$50,000

Insurance premiums

$2,000

Utilities

$3,000

Equipment depreciation

$5,000

B. Variable Costs

Cost Category

Cost per Unit ($)

Raw materials

$5

Manufacturing overhead

$3

Sales commissions

10% of sales

Marketing expenses

$2,000 per month

Packaging costs

$1 per unit

III. Break-Even Point Calculation

A. Formula

We utilize the formula:

Break Even Point (units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit).

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B. Calculation

  • Fixed Costs: $70,000 per month

  • Selling Price per Unit: $20

  • Variable Cost per Unit: $9

  • Break-Even Point = $70,000 / ($20 - $9) = 5,833 units

IV. Profit Volume Analysis

A. Forecasting Profits

Sales Volume (Units)

Revenue ($)

Total Costs ($)

Profit ($)

2000

40,000

82,000

-42,000

4000

80,000

112,000

-32,000

6000

120,000

142,000

-22,000

8000

160,000

172,000

-12,000

10000

200,000

202,000

-2,000

B. Sensitivity Analysis

Key variables affecting profits:

Key variables affecting profits

Increase (+) / Decrease (-)

Impact on Profit ($)

Selling Price

+$2

+$8,000

Variable Cost

-$1

+$4,000

V. Conclusion

This Break Even And Profit Volume Cost Analysis provides valuable insights into the financial feasibility of the new product line. It is recommended that [Your Company Name] focus on optimizing variable costs and consider pricing strategies to maximize profits.

VI. Additional Details

A. Market Research

  • Conducted market research indicates a strong demand for the proposed product, with potential sales estimated at 10,000 units per month.

  • Customer surveys suggest a willingness to pay up to $25 per unit for the product.

B. Competitor Analysis

  • Competitor analysis reveals similar products priced between $18 to $22 per unit.

  • However, none of the competitors offer the unique features that our product provides.

VII. Recommendations

  • Based on the analysis, it is recommended to proceed with the launch of the new product line.

  • Implement strategies to minimize variable costs and optimize pricing to maximize profits.

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