Break-Even Visualizer -- Template with provision to portray discount and "crash-cost" effects

www.cortrapar.com Copyright 2002 Corporate Training Partners, Inc. [email protected]

NOTES: No standardization exists in what costs organizations include in material and activity costs.
This template depends entirely on the judgment of the user in properly reflecting costs.
Many discount and excess-capacity costs increase on a non-linear (exponential) basis. In those cases,
this template will tend to underestimate the effects of aggressive discounting and over-capacity activity.
This template only applies discounts to units sold above capacity; if ALL units go down in price
as part of a discount, the impact is MUCH larger.
Instructions: Enter the data in the green user-data boxes as labeled.
The template creates a graph and data table of outcomes.
ATTENTION USER: Put cell A6 in the upper-left corner of your screen, to watch the graph update in real-time!

User Inputs:

Percentage Unit
Units per Price discount and/or
Year selling cost increase Labor and
at 100% of to result in short-term Material Cost Activity Cost
normal Sales Price market share gains (or "Variable (or "Variable
short-term Organization's per unit when to exceed short-term Cost") per Cost") per
capacity (the Period sales rate capacity (0% = zero unit produced unit produced
capacity (or "Fixed") is well within selling cost increases or within normal within normal
already in Costs short-term discounts required to short-term short-term
place): per year: capacity gain share) capacity : capacity :
4,000,000 $70,000,000 $90.00 23% $28.00 $40.00
Capacity Fixed Costs Unit Price Share Gain Costs Mat'l/Unit Conv/Unit

Break Even Visualizer with capability to show discount and "crash-cost" effects
$700,000,000

$600,000,000

$500,000,000

$400,000,000

$300,000,000 Column C Column D Colum

$200,000,000

$100,000,000

$0
800,000 2,400,000 4,000,000 5,600,000 7,200,000
0 1,600,000 3,200,000 4,800,000 6,400,000
Units of Production & Sales

Table of Unit Sales, Gross Revenue, Costs, and Profit

 Gross Revenue Period Labor &
Percent of Unit per year less (or "Fixed") Material Conversion
Short-Term Sales discounts and Costs Costs per Costs per
Capacity per Year special costs per year Year Year
0% 0 $0 $70,000,000 $0 $0
10% 400,000 $36,000,000 $70,000,000 $11,200,000 $16,000,000
20% 800,000 $72,000,000 $70,000,000 $22,400,000 $32,000,000
30% 1,200,000 $108,000,000 $70,000,000 $33,600,000 $48,000,000
40% 1,600,000 $144,000,000 $70,000,000 $44,800,000 $64,000,000
50% 2,000,000 $180,000,000 $70,000,000 $56,000,000 $80,000,000
60% 2,400,000 $216,000,000 $70,000,000 $67,200,000 $96,000,000
70% 2,800,000 $252,000,000 $70,000,000 $78,400,000 $112,000,000
80% 3,200,000 $288,000,000 $70,000,000 $89,600,000 $128,000,000
90% 3,600,000 $324,000,000 $70,000,000 $100,800,000 $144,000,000
100% 4,000,000 $360,000,000 $70,000,000 $112,000,000 $160,000,000
110% 4,400,000 $387,720,000 $70,000,000 $124,768,000 $178,880,000
120% 4,800,000 $415,440,000 $70,000,000 $137,536,000 $197,760,000
130% 5,200,000 $443,160,000 $70,000,000 $150,304,000 $216,640,000
140% 5,600,000 $470,880,000 $70,000,000 $163,072,000 $235,520,000
150% 6,000,000 $498,600,000 $70,000,000 $175,840,000 $254,400,000
160% 6,400,000 $526,320,000 $70,000,000 $188,608,000 $273,280,000
170% 6,800,000 $554,040,000 $70,000,000 $201,376,000 $292,160,000
180% 7,200,000 $581,760,000 $70,000,000 $214,144,000 $311,040,000
190% 7,600,000 $609,480,000 $70,000,000 $226,912,000 $329,920,000
scount and "crash-cost" effects

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ctivity costs.

In those cases,
apacity activity.
n price

aph update in real-time!

Percentage Percentage
Material Cost Labor & Activity
increase above Cost increase
normal above normal
short-term short-term
capacity capacity
(0% = (0% =
zero cost to zero cost to
exceed capacity) exceed capacity)
14% 18%
Mat'l Crash Cost Conv Crash Cost

d "crash-cost" effects

Column C Column D Column G

 Profit as a
percentage
Total Costs of Gross
Per Year Profit Per Year Sales
$70,000,000 -$70,000,000
$97,200,000 -$61,200,000 -170%
$124,400,000 -$52,400,000 -73%
$151,600,000 -$43,600,000 -40%
$178,800,000 -$34,800,000 -24%
$206,000,000 -$26,000,000 -14%
$233,200,000 -$17,200,000 -8%
$260,400,000 -$8,400,000 -3%
$287,600,000 $400,000 0%
$314,800,000 $9,200,000 3%
$342,000,000 $18,000,000 5%
$373,648,000 $14,072,000 4%
$405,296,000 $10,144,000 2%
$436,944,000 $6,216,000 1%
$468,592,000 $2,288,000 0%
$500,240,000 -$1,640,000 0%
$531,888,000 -$5,568,000 -1%
$563,536,000 -$9,496,000 -2%
$595,184,000 -$13,424,000 -2%
$626,832,000 -$17,352,000 -3%