BREAK-EVEN ANALYSIS



MODULE 5- CASE PRODUCTIVITY BREAK-EVEN ANALYSIS

Introduction

Companies need to conduct break-even analysis to know the number of units that are to be produced to reach a level where the firm's cost is equal to its revenue, it is the point where the company incurs no profit and no loss. Once the company is able to produce number of units that is at the level of break-even and reaches the level of production where the profit is equal to the cost of producing those units, after that point company will be able to earn profits at every additional output that will be produced (Brewer, Garrison & Noreen, 2009). Organizations try to accomplish the goal of achieving the level of break-even at the lowest possible units that could be produced. To carry out the break-even analysis it is firstly important to distinguish between the variable and the fixed costs. Variable costs are those that are tend to vary with the output, whereas on the other hand fixed costs are those that remain constant with the change in the units produces (Siegel & Shim, 2006).

Problem Statement

The problem that has been faced by Excellent Beer & Beverage Distributor (EBBD) is to decide the best way possible for making delivery quicker and in the most cost-effective manner. The report would analyze two options that have been presented to find out the least costly method to be applied. Virtual Company has been assigned the responsibility to get quotes from various vendors and construction companies to make the process effective and efficient. Virtual World has provided EBBD with two possible solutions that would assist in making decision regarding the loading of dock. EBBD could chose to either get an automated conveyor system that would help to move materials from one location to the other automatically, this could be attached to the delivery truck products will be placed on to the conveyor directly and will be moved to the warehouse, or the company could expand the dock by making changes to it through construction and making it able to have room for two unloading stations. However it is crucial to analyze the time both the option would take for loading and unloading of materials and the cost or investment that would be incurred for each of the options. The effect over the productivity and on the units required to break-even would also be needed to considered and ...