Application Activity: Break-Even Analysis

Refreshing Drink's name:

Lemon-Aid

Instructions
Complete the steps below by filling in the yellow cells. If you need additional help, see W05 Prepare: Team Project. The results of this activity will show your team's
projected yearly costs and revenue. Cell M54, outlined in red, will show your projected annual net profit.

Enter the Refreshing Drink's name in cell D4 then press "enter".

Use an Excel formula to calculate the annual fixed costs using the green table below. Notice that the numbers in the green table are monthly and you need to
calculate annual (yearly) fixed costs. Use cell references.
Look at the Price Demand Graph below. Choose a price per cup, then find the corresponding percent of demand.
Enter your choice of price per cup into cell E24 and the corresponding percent of demand into cell E25.
Try different combinations of price and demand (referencing the graph) until you find a combination that allows you to sell to as many neighbors as possible (high
demand) while also making as much money as possible (high price). You are not expected to find the precise numbers, but try and get as close as you can by
exprerimenting with these values.
Calculate the break even point using the instructions provided. Use cell references in your equation and remember the order of operations. Hint: you may need to
use parentheses.
Save and submit your file at Application Activity: Break-Even Analysis.

Neighborhood Market
Fixed Costs per Month
Shop Rental $320.91
Utilities (power, water, trash) $113.39

2. Annual Fixed Costs $5,211.60

Variable Costs $0.30

Price $0.90 3.
4.
% of Demand 50%

Break Even Point* 8686

6.
*Using Excel, calculate the break even point to find out how
many units you'll need to sell to cover your fixed costs.
Make sure you put parentheses around price and variable
cost.

Neighborhood Yearly Cost & Revenue

$14,000 Monthly Price Adjusted

Demand Demand
$12,000
January 272 136
$10,000 February 608 304
March 1,054 527
$8,000
Money

April 1,988 994

$6,000 May 3,193 1,597
June 4,123 2,062
$4,000
July 3,057 1,529
$2,000 August 3,193 1,597
September 3,766 1,883
$0
0 13387.5
October 2,690 1,345
Units Sold
November 2,094 1,047
December 737 369
Annual (Fixed and Variable) Costs Annual Revenue

Beginning of End of Year

Year
Total Units sold 0 13,388
Annual (Fixed and Variable) Costs $5,212 $9,228
Annual Revenue $0 $12,049
Annual Net Profit $2,821
Profit Margin 23%
 Rubric
This tab automaticaly genarates your partial score. Your instructor will g

CRITERIA RATING
Good: The refreshing drink's
Part 1: Name
name is entered in cell D4.

Good: The student Properly Fair: The student

calculated the annual cost
Part 2: Annual Cost calculated the annual costs but didn't use cell
using cell references. references.

Good: The price and % of

demand values correspond to Fair: Either the price and
each other on the Percent % of demand do not
Part 4: Price and % Demand line and are within correspond on the graph
Demand
the optimal range to make a or the price is not within
profit and reach the most the optimal range.
people.

Part 6: Break-Even Good: The break-even point Fair: The break-even point
is properly calculated using is correct but doesn't use
Point cell references. cell references.
bric
ore. Your instructor will grade the lines in gray.

RATING
Zero: No attempt was
made.

Not yet: The student tried to

Zero: No attempt was
calculate the annual cost but the made.
calculation is wrong.

Not yet: Neither the price and % of Zero: No attempt was

demand correspond nor is the price made on the Price or %
within the optimal range. of Demand.

Not Yet: There is an equation for the Zero: No attempt was

break-even point but the calculation
is wrong. made.