A Case Study of Cvp Analysis
Business overview & Cost analysis In order to compete with other milkshake shacks on the same beach of the resort, the small shake in my shack is priced at $5. 00, a medium shake costs $7. 00, and a large shake is priced at $10. 00.
My shack offers classic flavors of chocolate, strawberry and ‘manila, but also caters to eclectic tastes with raspberry, mocha, Ore shakes and many other different flavors.
The only difference in two graphs is the fixed expense line shifts up by $3000 when the owner salary is included. It also makes the intercept of total sales revenue and total expense line in the second graph shifts up by $3000. The slopes keep the same. 4.
Conclusion From the CAP analysis above, I need to sell 570 cups of milkshakes in order to break- even. If I quit the Job and pay myself $3000 per month to run the shack, 1188 cups of milkshakes need to be sold Just to break-even. There are several factors that will affect my decision about quitting my Job to open the shack.
One of the greatest aspects of working for someone else is security. Running a shack might bring me more income during the tourist season, but I also need to take the risk that I will lose money when it is out of season. Working for my own business also means I need to give up some other benefits like a pension or company provided insurance.
These are all the opportunity cost for leaving my Job. By being a business owner, I would have to earn equal amount to make sure that money that has been lost is recovered in almost similar time frame. In order to do so, I will choose keep my current Job and
Nor part-time in the shack. Firstly, it will always make sure I have enough money to pay back the loan for the shack and keep business smooth even in the off season. Secondly, I can still guarantee the retirement plan for the long time, which is more financially smart. Last but not the least, by working part time in the shack, I don’t need to build in the whole pay check into fixed cost.
Hence, the break-even point will be easier to reach. At the same time, as another part-time employee, I can help cut some labor cost or generate more sales revenue, in which way makes more profit for my business.
