On Tue, Sep 20, 2016 at 1:38 AM, kavneet kaur <[email protected]> wrote:

Decision Analysis

Name:

Institution:

Course:

Tutor:

Date:

Task 1

Food and Beverages at Southwestern University football games

a) The total fixed cost per game includes salaries, rental fees, and cost of the workers in the six booths. Based on the data in the case, complete the following Table 1: 

South-western University
Salaries	$20,000
Rental fees	$4,800
Booth worker wages	$1,260
Total fixed cost per game	$26,060

b) Allocate the total fixed cost to each food item as shown in the Table 2

Item	Percentage revenue	Fixed cost allocated
Soft drink	25%	$6,515
Coffee	25%	$6,515
Hot dogs	20%	$5,212
Hamburgers	20%	$5,212
Misc. snacks	10%	$2,606

c) Compute the break-even points for each of these items and complete the Table 3

Item	Selling Price	Var. Cost	Profit margin	% Revenue	Allocated Fixed Cost	Break even volume
Soft drink	$1.50	$0.75	$0.75	25%	6515	$8,686.67
Coffee	$2.00	$0.50	$1.50	25%	6515	$4,343.33
Hot dogs	$2.00	$0.80	$1.20	20%	5212	$4,343.33
Hamburgers	$2.50	$1.00	$1.50	20%	5212	$3,474.67
Msc. Snacks	$1.00	$0.40	$0.60	10%	2606	$4,343.33

d) Determine the total sales for each item that is required to break even, and show them in  Table 4: 

Item	Selling Price	Break even volume	Dollar volume of sales
Soft drink	$1.50	$8,686.67	$13,030.00
Coffee	$2.00	$4,343.33	$8,686.67
Hot dogs	$2.00	$4,343.33	$8,686.67
Hamburgers	$2.50	$3,474.67	$8,686.67
Msc. Snacks	$1.00	$4,343.33	$4,343.33
Total			$43,433.33

e) Write a brief report with your comments for Dr. Starr for his next meeting. Also comment critically on the assumptions and shortcomings of the decision based on break-even analysis (200 words). 

From the above computation, break even the total sales must be equal to $43,433.31. In the event, a total of 35,000 people attend

Task 2

Question 2.1

a) If students are charged $20 to attend the session, how many students must enroll for the company to break even?

· The fixed costs entails the cost of the room and the cost for the tutor to get = $300 + $75 = $375.

· For the learning materials, cost per student is $5

· Thus the costs are 375 + 5s.

· For each student, we get $20

· We can only start making money when 20s > 375 + 5s

· We solve by putting likes terms together as; = (20 – 5) s = 375.

· This gives = 15s = 375

· To have s = 25

· Thus to break even, a total of 25 students must enroll.

b) A somewhat smaller room is available for $200 for 3 hours. The company is considering this possibility. How would this affect the break-even point?

· With a cheaper room of $200 for three hours, the fixed cost drops to ($200 +$75= $275).

· We compute break even as follows to determine how it has affected it.

· From 20s > 275 + 5s

· We solve by putting likes terms together as; = (20 – 5) s = 275.

· This gives = 15s = 275

· To have s = 18.33

· Thus to break even, a total of 18.33 students must enroll.

· Since there is 0.33 of students, a total of 19 students need to enroll so as to break even.

Question 2.2

	Machine 1	Machine 2
Monthly lease cost	$600	$400
Cost per page copied	$0.010	$0.015
Charges per page for copies	$0.05

a) What is the break-even point for each machine?

Break-even point for each machine
Using the formula, BEP = Fixed cost / (Selling price per unit - Variable cost per unit)
	Machine 1	Machine 2
Fixed Coast	$600	$400
Selling price per unit- Variable cost per unit	$0.040	$0.035
BEP in units	15000	11428.57
Break-even point in dollars (BEP$) = Fixed cost + (Variable costs × BEP)	$750.000	$571.429

b) If Zoe expects to make 10,000 copies per month, then what would be the cost for each machine?

Cost for each machine
	Machine 1	Machine 2
Monthly lease cost	$600	$400
Cost per page copied	$0.010	$0.015
Copies made	6,000	4,000
Cost per machine	$660.000	$460.000

c) If Zoe expects to make 30,000 copies per month, then what would be the cost for each machine?

Cost for each machine
	Machine 1	Machine 2
Monthly lease cost	$600	$400
Cost per page copied	$0.010	$0.015
Copies made	18,000	12,000
Cost per machine	$780.000	$580.000

d) At what volume (the number of copies) would the two machines have the same monthly cost? What would be the total revenue for this number of copies?

· At 150,000,000 copies, the two machines will each produce 75,000 copies per month.

· The total revenue would be $7,500

Task 3

References

Choudhary, P, Patnaik, S, Singh, M & Kaushal, G., (2013). Break-Even Analysis in Healthcare Setup. Int J Res Foundation Hosp Healthc Adm 2013;1(1): 29 – 32.

Kucey, D., (1999). Decision analysis for the surgeon. World J Surg. 1999 Dec;23(12):1227-31.

Sears, E. D., & Chung, K. C. (2010). Decision Analysis in Plastic Surgery: A Primer. Plastic and Reconstructive Surgery, 126(4), 1373–1380. http://doi.org/10.1097/PRS.0b013e3181ead10a