ASSIGNMENT | Question #2 – If he decides to pay himself $2000 per month how many cars does he have to detail in a month now to break even?

Break Even Analysis

Managers use tools like the Break-Even Analysis in both the planning and controlling functions of Management. In this assignment, you’ll practice using the Break-Even formula to help Ryan determine when his business will begin to turn a profit.

Instructions:

Using the information from the Learning Module 2, calculate the break-even point in each of the scenarios.  Provide a response to the questions in the conclusion.  Be sure to use either Word or Excel and to show your work.

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Scenario 1

After receiving bad service at the local car wash, Ryan has decided to start VDB Detailing!  One of his first decisions when planning his business – he needs to calculate the number of vehicles he will need to detail before breaking even.  His uncle has offered to let him use a small section of his shop for only $300 per month. Ryan is going to pay his friend, Gabe, $10/hour to help him. He has estimated his additional expenses and other details to be the following:

• Insurance $200/month
• His share of monthly utilities $95
• Wax (will yield 10 cars) $19.00
• Towels, soap, and other supplies $3.00/vehicle
• Leasing of equipment $100/month
• Marketing $105/month budgeted
• He estimates that it will take him 4.5 hours to detail a vehicle if he has help from his friend.
• He plans to charge $120 per vehicle.

Question #1 – How many vehicles does Ryan need to detail each month to break even?   

Scenario 2

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Ryan is now considering leaving his full-time job to grow his business but does not want to lose his salary.

Question #2 – If he decides to pay himself $2000 per month how many cars does he have to detail in a month now to break even? Assume all other figures remain constant from scenario 1.