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Strategy

Step 2

Calculation of First Year Break Even Points Calculation of First Year Break Even Points
Note M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 1st 1st 2nd 3rd 4th 1st
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year Qtr Qtr Qtr Qtr Year
Stores
Multiply by 200 carts
Total Carts
Multiply by Revenue per cart
Total Revenues 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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
Printing 3
Replacement (even distribution) 4
Cart Rental (10% Revenue) 5
Mktg. Sales & Comm. 6
Grocery Store Operations 7
Total VC 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Contribution Margin (CM) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
CM per Unit/Cart 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! ERROR:#DIV/0!
Fixed Costs (FC)
Accounting & Audit 8
Advertising (even distribution) 9
Auto Lease 10
Bank Charges 11
Entertainment & Promotion 12
Insurance 13
Legal 14
Management Fees 15
Office & Sundry 16
Public Relations 17
Rent 18
Salaries & Benefits 19
Stationary & Printing 20
Telephone & Faxc 21
Travel & Accommodation 22
Total FC 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenses (VC + FC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Net Operating Income 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Break Even Point in terms of carts ERROR:#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 stores ERROR:#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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