4-2 exel

Break Even Analysis

Learning Activity - Global Break-Even Analysis					Instructions:
					1) Given only the 3 options shown below and their associated Fixed and Variable costs, compute the Total Annual Cost for each option
	Location	Annual Fixed Cost	Unit Variable Cost per unit		Note: Total Cost = Fixed Cost + Variable cost per unit * # of units
	USA	$ 1,500,000	$ 8.50		2) View the chart and find the "Break Even Point" were Total Costs for 2 options are equal (if the lines intersect).
	Mexico	$ 2,040,000	$ 7.50		3) Based on the Forecasted annual sales, use the chart to identify the lowest cost option.
	China	$ 1,790,000	$ 6.75		Note: This analysis only includes those two critical costs -- make sure you also consider other costs, risks, and qualitative considerations before making your final decision
																	Q	USA	Mexico	China
		Forecasted annual sales of first 5 years =	195,000	units													0	$ 1,500,000	$ 2,040,000	$ 1,790,000
																	195,000	$ - 0	$ - 0	$ - 0
																	390,000	$ 4,815,000	$ 4,965,000	$ 4,422,500
	Location Options
	USA	Mexico	China
Total Cost

Global Location - Break-Even Analysis

USA 0 195000 390000 1500000 0 4815000 Mexico 0 195000 390000 2040000 0 4965000 China 0 195000 390000 1790000 0 4422500

Quantity purchased, units

Total Cost, annual