Break Even Analysis
- 1. FOR CHOOSING FACILITY LOCATION BY Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181 BREAK EVEN ANALYSIS
- 2. FACTORS AFFECTING LOCATION PLANNING Break Even Analysis Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181 CONTROLLABLE Proximity to Markets Supply of Materials Transportation Facilities Infrastructure Availabilities Labour and Wages Capital
- 3. FACTORS AFFECTING LOCATION PLANNING Break Even Analysis Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181 UNCONTROLLABLE Government Policies Climatic Conditions Supporting Industries and Services Community and Labour Attitudes Community Infrastructure and Amenity
- 4. METHODS TO EVALUATE LOCATION Factor Rating Method Load Distance Model Centre of Gravity Approach Transportation Method Break-Even Analysis Break Even Analysis Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181
- 5. Break even analysis implies to finding Break-even Point at which revenues and costs agree exactly. Break-even point (BEP) is the volume of output at which neither a profit is made nor a loss is incurred. BEP = F / (S-V) units Where F = Fixed Cost S = Selling Price V = Variable Cost Per Unit Break Even Analysis Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181 BREAK EVEN ANALYSIS
- 6. Fixed Cost Facility Cost Furniture and Machinery Cost Insurance, Interest Expense, Property Taxes, Assets, Depreciation of Assets Utilities Expenses, Building Rent Salaries irrespective of Work Hours, Equipment Rental Variable Cost Raw Materials, Production Supplies, Delivery Charges and Shipping Charges Commissions and Performance Bonuses Break Even Analysis Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181 BREAK EVEN ANALYSIS
- 7. Method of Cost- Volume analysis used for Industrial Locations Amount of goods required to be sold to just cover cost Used when cost of each location is known Break Even Analysis Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181 LOCATIONAL BREAK-EVEN ANALYSIS
- 8. STEPS IN BREAK-EVEN ANALYSIS Step 1: For each location, determine fixed and variable cost Step 2: Plot the total cost of each location on one graph Step 3: Identify ranges for which each location has lowest total cost Step 4: Solve algebraically for the break-even points over the identified ranges Break Even Analysis Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181
- 9. Total Cost = F + cQ Total Revenue = pQ Break-Even is where Total Revenue = Total Cost Q= F/(p-c) where Q = break-even quantity p = price per unit c = variable cost per unit F = Fixed Cost Break Even Analysis Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181 FORMULA OF BREAK EVEN ANALYSIS
- 10. BREAK EVEN ANALYSIS FOR FACILITY LOCATION PLANNING - Example Break Even Analysis A sports goods manufacturing company intends to set up a facility to produce Badminton racquets. It is considering sites X, Y & Z for this purpose. Cost data for the sites are given in below table. If the Selling Price is Rs. 300 per racquet and the annual demand is 3000 units which site would you recommend ? SITE FIXED COST VARIABLE COST X Rs.50,000 Rs.135 Y Rs.100,000 Rs.110 Z Rs.120,000 Rs.120 Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181
- 11. BREAK EVEN ANALYSIS FOR FACILITY LOCATION PLANNING - Solution Break Even Analysis Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181
- 12. THANK YOU