I need all the help I cant get with this Final Test Finance test Please?

Question

I have to compute the fixed cost,variable cost and break even point of the following organization, but I dont know if I have to calculate for each year or jus the sum of the four years. Please help, this is due tomorrow and my profesor did not reply to question yet. the Information provide was the following

2002 (A) 2003 (A) 2004 (A)

Revenue
Grant Income $617,169.00 $632,889.00 $1,078,837.00
Customer Fees $506,788.00 $579,824.00 $1,004,874.00
Other $39,567.00 $31,362.00 $107,370.00
Interest $1,541.00 $186.00 $162.00

Total Revenue $1,165,065.00 $1,244,261.00 $2,191,243.00

Expenses
Program services
Payroll and benefits 417,004.00 520,069.00 915,787.20
Supplies 125,101.20 $171,622.77 320,525.52
Rent and Utilities 150,000.00 150,000.00 150,000.00
Telephone 24,000.00 24,000.00 24,000.00
Other 117,903.00 79,888.00 $115,999.00
Management and other 351,000.00 371,101.00 445,819

total expenses 1,185,008.00 1,361,681.00 1,972,131.00

excess revenues of expenses 19,943.00 72,420.00 219,112.00

customer 5,962.00 6,821.00 11,822.00

This what I did
Fixed cost
Rent and utilities 150,000
telephone 24,000
total fixed cost. 174,000
I did this for the 3 diferents years

Variable cost
Payroll and benefits 417,004.00
Supplies 125,101.20
other 117,903.00
Management and other 351,000.00
Total Variable cost 1,011,008.20

I'm dont know how to calculate the breakeven point and please explain me if I have to calculate for each year!! Thanks

Answer 1

Although I cannot give you a specific solution for this question, I have some comments. Hope it helps:

* To put it simply Break-even point for a product or a combination of products is the quantity of volume of that product (or combination of products), or level of activities to be produced and sold or serviced to customers at which the total of sales revenue equals the total of fixed and variable costs. ==> Therefore first of all we should be able to identify what quantity we are looking at in the context of the question. (honestly speaking, I can't figure it out from the question you gave. Although you gave the number of customers, but I doubt that the break-even point should be measured in the quantity of customers - unless the company charges and earns revenue and incur expenses by customer regardless of the amount of service/workload it has to conduct for each of the customer).

* Unless the marker intentionally simplifies the question and answer, because you have different kinds of revenue here, normally each kind of revenue may be related to a different break-even point (because they are related to different products/ different basis of charges/ different cost driving activities,...)

* Looks like the marker expects you to calculate the breakeven point for each year, assuming our understanding is correct that the fixed costs are those which stay the same in absolute amount in 3 years, and the remaining items are fully variable costs (although by their nature those expenses are not necessarily fully variable!). In this case while the total fixed costs remain unchanged in 3 years, the variable cost per unit of product or activity may change each year (I just guess, I don't know - it depends on what is the product or activity,... you are supposed to use in the calculation).

* A simple example of calculation of breakeven point:

A company manufacturing and selling a single Product X.
Sales revenue per 1 unit of X is: 100$
Variable cost per 1 unit of X is: 25$
Total Fixed cost in each month for the company is: 600$
Calculation of breakeven point for the company:

Step 1: Calculate VARIABLE CONTRIBUTION per unit of product = Revenue - Variable cost = 100$ -25$ = 75$

Step 2: Calculate BREAKEVEN POINT for a period = Total fixed cost for the period / Variable contribution per unit = 600$ / 75$ = 8 units of product

Step 3 (Test): at Breakeven volume: Revenue - Total variable cost - Total fixed costs = 0

8 units x 100$ - 8 units x 25$ - 600$ = 0

==> Breakeven point: 8 units per month

Answer 2

Very similar situation here. I passed my road test and was finally happy I would be able to use my mom's Mercedes Benz on Saturday nights and stuff. All of a sudden on Saturday morning my dad tells me he's giving me his old car- the leasae is up in 3 months so it's yours. I was so pissed because it was a Chevy trailblazer, and how the h*ll and I going to drive a freaken huge car!!?? So I appreciated what I had (I was lucky to even get a car t begin with) and I actually got used to it! It took time for me to like the car, but I got used to it! Now, 7 months later, looking back, I wish I can still have my own car- just anything. Now I need to share cars with my parents.

Answer 3

I would do each year since they gave you the info that way then you could do them together if you have extra time.