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Break-Even Analysis Scenario ...

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Accounting

Break-Even Analysis Scenario
You can charge $1,075 for a new service. Demand is anticipated to be 8,000 units a year. Your business is able to handle up to 16,500 units annually, so capacity should not be a problem. The average collection rate is 80%. The new service has annual fixed costs of $4,700,000. Variable cost per unit of service is $420.
Price to be Charged
Collection Rate
Average Collection per Service
Variable cost per unit of service
Fixed Operating Costs
Break-Even Point =
Fixed Cost/(Net Revenue per Unit-Variable Cost per Unit)
Capacity:
Demand:
Breakeven:
Question: Use break-even analysis to determine if this new service is financially viable. If the business is not financially viable, what steps could you take to make a case to proceed with implementation? Explain your decision.

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