Create a Break-Even Analysis for Your Business

Fixed costs

Wages= £3,339.60

Rent= £700.00

Advertising= £300.00 (average)

Utility bills=£570.00 (average)

Total=£4909.60

Variable Costs per unit

Variable cost/unit=44.07/35=£1.26

Total=£1.26

Average selling Price

69.17(total price of items)/35(number of items) =£1.98 per unit

Total costs=£4909.60+£44.07

Contribution=£1.98-£1.26=£0.72

Break-even output=£4909.60/£0.72=6819 units

According to the breakeven chart, “The Lithuanian Sunset” will have to sell 6819 units of produce in a month in order to breakeven. Yet, given that the estimated maximum output for “The Lithuanian Sunset” is 8,000 units, decreases the feasibility of a Lithuanian shop, as it would put pressure on “The Lithuanian Sunset” to operate at almost full capacity, which is particularly hard for a business to achieve at its teething age. Nevertheless, a high breakeven point to a certain extent makes “The Lithuanian Sunset” more feasible as it would encourage “The Lithuanian Sunset” to jump before it is pushed to make important management, marketing, operational and financial decisions, and possibly even apply the marketing model to set strategies to increase the likelihood of achieved break-even output. Although it is important to realise that a decrease in prices would increase consumer demand and “The Lithuanian Sunset” will have to expand in order to sustain increasing demand from consumers. Based on my findings, I would consider expanding the premises of the shop in order to reduce capacity utilization, as the breakeven chart portrays that “The Lithuanian Sunset” will have to be operating at almost full capacity to breakeven.