# Question: managers use tools like the breakeven analysis in both the...

###### Question details

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
Eric determine when his business will begin to turn a profit.

Instructions:

Using the information from the Planning and Controlling
Techniques module, calculate the break-even point in each of the
scenarios. Provide a response to the questions in the conclusion.
Be sure to show your work.

Scenario 1

Eric wants to start a car detailing business but is unsure how
many cars he will need to detail before making a profit. His cousin
has offered to let him use a small section of his shop for only
$300 per month. Eric is going to pay his friend $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 $90 per vehicle.

Question - How many vehicles does Eric need to detail each
month to break even?

Scenario 2

Eric is now considering leaving his full-time job to grow his
car detailing business but does not want to lose his salary.

Question - If he decides to pay himself $2000 per month how
many cars does he have to detail in a month now to break
even?

Conclusion

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