Posted: December 12th, 2022

**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, calculate the break-even point in each of the scenarios. Provide a response to the questions in the conclusion. *Be sure to use either Word or Excel and to show your work*.

**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 $2.00
- Towels, soap, and other supplies $3.50/vehicle
- Leasing of equipment $100/month
- Marketing $105/month budgeted
- He estimates that it will take him 4 hours to detail a vehicle if he has help from his friend (Hint: how much is this total per car?).
- He plans to charge $120 per vehicle.

Question #1 – How many vehicles does Ryan need to detail each month 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.

**Conclusion**

Are these numbers attainable? Please explain. List two suggestions you could give Ryan that would affect his break even point in a favorable manner, using the Break-Even Formula to justify them.

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