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 and the Break-Even formula in the Week 4 Professor Discussions, you will categorize each of the items in the scenario, then calculate the break-even point. Provide a response to the questions in the conclusion. Be sure to use Microsoft Word and to show each step of the math. 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 – Make a list of your fixed costs, variable costs, and price. Calculate the number of vehicles Ryan needs to detail each month in order to break even. Scenario 2 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. Again, show your math.
