Example Of Break Even Analysis Case Study

Published: 2021-06-21 23:44:29
essay essay

Category: Management, Business

Type of paper: Essay

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Problem statement
Excellent Beer & Beverage Distributors (EBBD) has over the years been experiencing delays when it comes to loading and unloading of its products. This is reflected by the number of deliveries that are made in a given working day. Due to this, the management of Excellent Beer & Beverage Distributors (EBBD) tasked me to evaluate on the two options in order to come up with the best solution to solve this menace. The options at hand were the use of an automated conveyor system and the expansion of the existing dock.
Assumptions
In this case study, we assume that the number of our deliveries does not fall below the daily average of 28 daily vendor deliveries, but instead it increase annually by 3 percent. This means that the demand for our products will always be experiencing an upward increase and this will be a major boost for the company in providing quality and timely services to our clients. Secondly, we assume that a year has 365 days. This value is used in determining the estimated annual volume.
Solution
In order to come up with this decision, cost equations for both the options were derived. These included fixed and variable cost of each option (Refer to the Excel sheet). These were derived as follows:
Acme Speed Roller = Annual fixed cost + Annual variable costs (But its annual fixed cost was $ 22, 500)
Annual variable costs = $ 8,200 + $(1.75 x 30) + $(6.16 x30) = $ 8,437.3
Jones Construction = Annual fixed cost + Annual variable costs (But its annual fixed cost was $ 17, 500)
Annual variable costs = $(8.4 x30) = $ 252
Annual estimated volume = 28 daily deliveries x 365 days = 10220 deliveries
Recommendation
In such scenarios, it is advisable for the management to choose the first option when the estimated volume is greater than the breakeven volume. After an in-depth analysis of the two options, I can confidently say that the best option is to adopt the first option: the installation of the Acme Speed Roller. This will ensure efficiency in the operations of the company and also cut down on its operation costs.

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