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.

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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.