Microsoft Office Tutorials and References
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One More Example—Break-Even Point Analysis
FIGURE 16.6 Using Goal Seek for a New Interest Rate
FIGURE 16.7 Second Model
Break-Even Point Analysis
One More Example—Break-Even Point Analysis
Figure 16.7 is another example that demonstrates the same Goal Seek concepts
shown above. In the example, our projections show $140,000 losses in the statement.
The operating income is negative.
The objective here is to have this statement break even. In other words: What do
you have to change to eliminate the $140,000 in losses and make it at least 0? The
tool to use again is Goal Seek. You can use Goal Seek and calculate the impact of
the changes of a few of the inputs: Sales Volume/Units Sold, Price per Unit, or any
one of the other inputs in the statement.
Start with the number of units sold. How many units do you have to sell in order
to break even? If you use Goal Seek, you will find out, as you see in Figure 16.8, that
the sales volume would have to reach at least 59,333 units.
You can try Goal Seek by yourself. I tried Goal Seek for the Price per Unit as you
can see in Figure 16.9. Keeping all other inputs fixed, you would have to sell the
product for at least $22.80 in order to break even.
I also tried reducing the marketing budget. See Figure 16.10. When I used Goal
Seek, it indicated that we can break even if the marketing budget is reduced to
$110,000.
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