Break-Even Analysis confirms from your costs and sales at what point your business would “break-even” (total cost equals sales). This is a very important mathematical equation that will determine early on in your business if you are making enough income or creating enough sales to cover your costs. Not knowing this can create a sense of false security that can be devastating to a start-up company.
Break-even Analysis Example
Imagine that you want to launch a new business selling a smartphone app. You make the following assumptions about your costs and revenue.
Expected average selling price = $7.
Estimated fixed costs = $75,000 (this is enough to cover your salary and pay for a small office). These costs will not change with the number of apps sold.
Variable costs = $0.50 (these are the transaction fees you need to pay on each sale).
(1) Armed with this information, calculate the break-even point in units:
(2) To earn a profit of 5%, how many units do you need to sell?
(3) What if you were able to reduce the estimated fixed cost to $65,000, what would your new break-even be in units?
(4) What if you missed the mark on variable costs and the actual variable costs are $1.15, what would your break-even be in units?
Category: Business and math
Break-Even Analysis confirms from your costs and sales at what point your business would “break-even” (total cost equals sales). This is a very important mathematical equation that will determine early on in your business if you are making enough income or creating enough sales to cover your costs. Not knowing this can create a sense of false security that can be devastating to a start-up company.
Break-even Analysis Example
Imagine that you want to launch a new business selling a smartphone app. You make the following assumptions about your costs and revenue.
Expected average selling price = $7.
Estimated fixed costs = $75,000 (this is enough to cover your salary and pay for a small office). These costs will not change with the number of apps sold.
Variable costs = $0.50 (these are the transaction fees you need to pay on each sale).
(1) Armed with this information, calculate the break-even point in units:
(2) To earn a profit of 5%, how many units do you need to sell?
(3) What if you were able to reduce the estimated fixed cost to $65,000, what would your new break-even be in units?
(4) What if you missed the mark on variable costs and the actual variable costs are $1.15, what would your break-even be in units?
Post 1 Initial Response of 8-10 sentences for 20 points.
* must be attest 300 words *As responsible citizens, not only is it our duty to pay taxes, it is important to understand (as much as possible) how our tax system works and how our taxes are calculated. Also, Employers are required to pay certain taxes on behalf of their employees so it’s important to understand the rules that apply to .
Watch this video “Personal Taxes-A Visual Explanation” https://youtu.be/auUcnb7vIAs?si=JkQzW7C9l6ixEfnF and read this article on “how employers should calculate payroll tax,” and answer the following question:
What was your greatest takeaway from watching this video? In other words, what did you learn that you didn’t know before?
“Different levels of income are taxed at different amounts” – In your opinion, why do we do this?
How would it impact the employee if employers did not contribute to certain taxes (such as Social Security and Medicare) on their behalf?
As a small business owner, how does this contribution affect your financial position? Think of both pros and cons.