Overview
The next step in planning for your new business is to analyze the cost behaviors and systems of your industry and conduct the relevant financial calculations to determine appropriate costing solutions. In this milestone assignment, you will conduct a break-even analysis to determine your target profits and the selling price you plan to use to achieve these profits for each product.
Prompt
Use information from Milestone One and the provided Milestone Two Market Research Data Appendix Word Document to conduct a cost-volume profit analysis. Complete the “Contribution Margin Analysis” and “Break-Even Analysis” tabs in the Project Workbook Spreadsheet that you used for completing the Milestone One assignment.
Specifically, you must address the following rubric criteria:
- Contribution Margin. Determine your contribution margin per unit in the “Contribution Margin Analysis” tab.
- Choose a sales price for each product.
- Calculate the contribution margin for each product based on your sales price and the variable cost for that product. Show your work using calculations to the side of the table or using appropriate formulas in the table.
- Break-Even Analysis. Use cost-volume-profit (CVP) analysis to determine your break-even points for achieving your target profits in the “Break-Even Analysis” tab.
- Determine the break-even points for each product. Show your work using calculations to the side of the table or using appropriate formulas in the table.
- Determine break-even units for the suggested target profits for each product. Show your work using calculations to the side of the table or using appropriate formulas in the table.
Guidelines for Submission
Submit the Project Workbook with the “Contribution Margin Analysis” and “Break-Even Analysis” tabs completed. This file should be completed and submitted using Microsoft Excel.
| Milestone Two Rubric | |||||
| Criteria | Exemplary (100%) | Proficient (85%) | Needs Improvement (55%) | Not Evident (0%) | Value |
| Contribution Margin: Sales Price | Chooses a sales price for each product | N/A | N/A | Does not attempt criterion | 10 |
| Contribution Margin | Calculates the contribution margin for each product, with no errors | Calculates the contribution margin for each product, with some errors | N/A | Does not attempt criterion | 20 |
| Break-Even Analysis: Break-Even Points | Determines the break-even points for each product, with no errors; shows work through calculations or formulas | Determines the break-even points for each product, with minimal errors | Determines the break-even points for each product, with significant errors | Does not attempt criterion | 30 |
| Break-Even Analysis: Target Profits | Determines break-even units for the suggested target profits for each product, with no errors; shows work through calculations or formulas | Determines break-even units for the suggested target profits for each product, with minimal errors | Determines break-even units for the suggested target profits for each product, with significant errors | Does not attempt criterion | 40 |
| Total: | 100% |
