Break-Even Analysis of Target

-BREAK-EVEN ANALYSIS OF TARGET

BREAKEVEN ANALYSIS OF WALMART

The in consideration in this case is Vordshoms that was started in 1901 as a shoe store by John v . Nordshoms . Nordshoms has its goods priced highly but they insist on quality , value , trust and selection . It involves in stores business . It has differentiated its products into segments as we have children clothes , women and men . They hold customers by offering convenient locations , special or unique assortment of goods great services , better quality goods and better services than competitors offer . They also have

included other brands i .e . they purchased best apparels a clothes company and ventured to clothes market . It is among the largest stores in the country . I have identified the sale chest deep freezers being sold in their departments . I have considered operations for year 2006 . At breakeven point it is calculated as follows

BEQ FC /P-VC

Where

FC Fixed Costs

P Price Charged per unit

VC Variable Costs of production

In case I have assumed the costs associated with the chest deep freezers are

Fixed Costs :- depreciation US 50 ,000 , managers salary US 35 ,000 insurance US 65 ,000

Price Charged perchest deep freezer :- US 1 ,500

Variable Costs of production : - two units of material are used at US 125 , labor charges per US 20 hour 15hrs of three employees each

At Break-even , the cost of production is equivalent to the sales revenue . The unit variable costs are materials 2units of materials x US 125 US 250 and labor costs per unit is 3 employees X 15 hours X US 10 US 450 per unit

Therefore , breakeven analysis will be as

When they want to sell at US 1000 the break-even will as follows :-

BEQ FC /P-VC or Sales Let y be number of units to be sold to breakeven 150 ,000 188units of chest deep freezer

1500-700

US 1500X y US 50 ,000 US 35 ,000 US 65 ,000 US 250 y US 450 y

Therefore US 150 ,000 US 1500y - US 700y

800y 150 ,000 188 units of chest deep freezer

In for the Vordshoms to be able to avoid loses must sell 188 units or more . Any less than that will results to loss at this unit price . Let me take an example of sales prices price per unit as US 1800 and US 1200 . US 1800 US 1200

Sales 338 ,400 282 ,000

Insurance (65 ,000 ( 65000

Depreciation ( 50 ,000 (50 ,000

Managers salary 35 ,000 (35 ,000

Materials (47 ,000 (47 ,000

Direct Labor (84 ,600 (84 ,600

PROFIT 56 ,800 ( 56 ,000

Nb : All figures are in US REFERENCES

Ask , U , Ax , C . and Johnson 's (1996 cost management in Sweden : from modern to post modern management accounting

Drury C (2000 Management and cost Accounting 5th edition ,business press Thomson Learning...