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Step 2Calculation of First Year Break Even Points

Step 2

Calculation of First Year Break Even PointsCalculation of First Year Break Even Points
NoteM1M2M3M4M5M6M7M8M9M10M11M121st1st2nd3rd4th1st
JanFebMarAprMayJunJulAugSepOctNovDecYearQtrQtrQtrQtrYear
Stores
Multiply by 200 carts
Total Carts
Multiply by Revenue per cart
Total Revenues1000000000000000000
Variable Costs (VC)
Amortization (2 year S/L)

Burcicki, Jim: While amortization in its normal sense would be considered a FC, it is considered a VC here because the number of carts is variable even though we are using an average of 200 carts as the basis.

2
Printing3
Replacement (even distribution)4
Cart Rental (10% Revenue)5
Mktg. Sales & Comm.6
Grocery Store Operations7
Total VC000000000000000000
Contribution Margin (CM)000000000000000000
CM per Unit/CartERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!ERROR:#DIV/0!
Fixed Costs (FC)
Accounting & Audit8
Advertising (even distribution)9
Auto Lease10
Bank Charges11
Entertainment & Promotion12
Insurance13
Legal14
Management Fees15
Office & Sundry16
Public Relations17
Rent18
Salaries & Benefits19
Stationary & Printing20
Telephone & Faxc21
Travel & Accommodation22
Total FC000000000000000000
Total Expenses (VC + FC)000000000000000000
Net Operating Income000000000000000000
Break Even Point in terms of cartsERROR:#DIV/0!

Burcicki, Jim: The Formula Method – Managerial Accounting, 15th ed., Page 201

BE (Carts) = Total FC / (CM per Unit/Cart)

ERROR:#DIV/0!

Burcicki, Jim: The Formula Method – Managerial Accounting, 15th ed., Page 201

BE (Carts) = Total FC / (CM per Unit/Cart)

Break Even Point in terms of storesERROR:#DIV/0!

Burcicki, Jim: The Equation Method – Managerial Accounting, 15th ed., Page 201

Break Even = Q

Unit CM = CM / Total # of Stores

Profit = Unit CM x Q – Fixed Expense


Burcicki, Jim: The Formula Method – Managerial Accounting, 15th ed., Page 201

BE (Carts) = Total FC / (CM per Unit/Cart)

ERROR:#DIV/0!

Burcicki, Jim: The Equaion Method – Managerial Accounting, 15th ed., Page 201

Break Even = Q

Unit CM = CM / Total # of Stores

Profit = Unit CM x Q – Fixed Expense


Burcicki, Jim: Will cost 15k so I am assuming the expense is being accrued and therefore expensed in December as an adjusting entry.

Burcicki, Jim: The author expenses the 10k in January. However, it states that the 10k will be purchased during the first quarter – first three months – in sufficient quantities to last the entire year. This should be a prepaid and then expensed during the year. With no set amoutns, I assumed an even distribution throughout the year.

Burcicki, Jim: While amortization in its normal sense would be considered a FC, it is considered a VC here because the number of carts is variable even though we are using an average of 200 carts as the basis.

Burcicki, Jim: The Formula Method – Managerial Accounting, 15th ed., Page 201

BE (Carts) = Total FC / (CM per Unit/Cart)

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