Case study break even analysis

M&M Case Study: Break-Even Analysis

This exercise provides you the opportunity to apply break-even analysis concepts and Excel skills to a case study problem. The activity continues our work with Mars Inc. M&M candies.

Assignment

Your company is a wholesaler of Mars candies, where you are responsible for the M&M product line. Mars has given you some pricing forecast data concerning 2021 product prices and payment terms. You need to determine the break-even points for your facility based on the information detailed below.

Plain M&M Analysis: You have identified the following 2021 price points on cases of Plain M&M candies from five different suppliers (variable costs)

Supplier A: 48-count 1.74 oz bags will have a cost of $15.91 per case
Supplier B: 48-count 1.74 oz bags will have a cost of $15.65 per case
Supplier C: 48-count 1.74 oz bags will have a cost of $14.75 per case
Supplier D: 48-count 1.74 oz bags will have a cost of $14.91 per case
Supplier E: 48-count 1.74 oz bags will have a cost of $15.00 per case
Your additional costs are below:

Fixed costs for your warehouse are $4,500,000 annually
The selling price per case is $32.99
Labor costs (variable cost) for the warehouse are $5.67 per case
Marketing costs (variable cost) for the candy are $2.00 per case
Assignment:

Part #1: You need to analyze the break-even point for each of the listed supplier options (** Hint-You will need to calculate five break-even points).

In the Excel document for this assignment, there are five tabs named “Part #1 Supplier A” through “Part #1 Supplier E”. Each tab represents one of the five payment options. Complete the indicated break-even analysis by filling in the indicated columns, cells, and graphs. Remember, every chart must have a title, axis labels, axis titles, and a legend.

Determine the supplier option that results in the lowest break-even point based on the number of cases and dollars (** Hint – it should be the same price point option for both the number of cases and dollars). Complete the information on the “Conclusions” tab for Part #1.

Part #2: The market has changed. Your VP of sales indicates that the market will support a

$35.00 per case selling price. To accomplish this, however, marketing costs will need to be increased by 25%. You need to analyze the break-even point for the option you selected with the lowest break-even point in Part #1. Use the “Part #2” tab in the document for your analysis. Complete the information on the “Conclusion” tab for Part #2.

Part #3 – Finally, answer the question on the “Conclusions” tab for Part #3.

Submit one file with the filename Breakeven.xlsx

Grading:

Part #1:

Break-even graph for optimal option 10 points

Graph Title 1 point
x-axis title 1 point
x-axis labels 1 point
y-axis title 1 point
y-axis labels 1 point
Legend 2 points
Data lines (fixed costs, revenue, and total costs) 3 points
Correct break-even point (in units) for each supplier option (2 points each) 10 points Correct break-even point (in dollars) for each supplier option (2 points each) 10 points

Part #2:

Correct new break-even point (in units) for optimal supplier option 2 points Correct new break-even point (in dollars) for optimal supplier option 2 points

New break-even graph for the optimal option 10 points

Graph Title 1 point
x-axis title 1 point
x-axis labels 1 point
y-axis title 1 point
y-axis labels 1 point
Legend 2 points
Data lines (fixed costs, revenue, and total costs) 3 points
Conclusions

Part #1:

Identification of optimal options:

Optimal option 1 point
BEPU 1 point
BEP$ 1 point
Part #2:

Identification of new break-even points:

BEPU 1 point
BEP$ 1 point
Part #2:

Part #1-Supplier A
Break Even Analysis for Supplier A Variable Cost
Selling Price Per Unit
Fixed Cost
Units Fixed Costs Variable Costs Total Cost Total Revenue BEPU
$0 $0 $0 $0 BEPS
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
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Insert formulas to calculate break-even point in units and break-even point in dollars

Enter correct data here

Enter # of units sold to format the x-axis and calculate costs.

Enter fixed costs in each row

Enter formula to calculate variable costs

Enter formula to calculate total costs

Enter formula to calculate total revenue

Replace this figure with a graph

Part #1-Supplier B
Break Even Analysis for Supplier B Variable Cost
Selling Price Per Unit
Fixed Cost
Units Fixed Costs Variable Costs Total Cost Total Revenue BEPU
$0 $0 $0 $0 BEPS
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
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$0 $0 $0 $0
Replace this figure with a graph

Part #1-Supplier C
Break Even Analysis for Supplier C Variable Cost
Selling Price Per Unit
Fixed Cost
Units Fixed Costs Variable Costs Total Cost Total Revenue BEPU
$0 $0 $0 $0 BEPS
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
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Replace this figure with a graph

Part #1-Supplier D
Break Even Analysis for Supplier D Variable Cost
Selling Price Per Unit
Fixed Cost
Units Fixed Costs Variable Costs Total Cost Total Revenue BEPU
$0 $0 $0 $0 BEPS
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
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Replace this figure with a graph

Part #1-Supplier E
Break Even Analysis for Supplier E Variable Cost
Selling Price Per Unit
Fixed Cost
Units Fixed Costs Variable Costs Total Cost Total Revenue BEPU
$0 $0 $0 $0 BEPS
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
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Replace this figure with a graph

Part #2 Analysis
Break Even Analysis for New Costs Variable Cost
Selling Price Per Unit
Fixed Cost
Units Fixed Costs Variable Costs Total Cost Total Revenue BEPU
$0 $0 $0 $0 BEPS
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
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Replace this figure with a graph

Conclusions
Part #1 Conclusion
Indicate which of the five payment options has the lowest break-even point and provide the break-even point in dollars and units.
Option:
BEPU:
BEP$:
Part #2 Conclusion
Indicate the new break-even point in dollars and units.
BEPU:
BEP$:
Part #3 Reflection
Discuss whether the new BEP increased or decreased. Since the selling price increased and the variable costs increased, explain why the BEPU behaved as you have observed.