CheckPoint: Calculating Fixed Costs, Variable Costs, and Break-Even Point for a Program
· Calculate the fixed cost, variable costs, and break-even point for the program suggested in Appendix D. BASED ON THE ASSIGNMENT DIRECTIONS FOUND IN THE COURSE MATERIALS FOLDER.
· Base your calculations on the financial data for 2002.
XYZ NON-PROFIT CORPORATION
INCOME STATEMENT
2002 (A) 2003 (A) 2004 (A)
Revenue
Grant Income $617,169.00 $632,889.00 $1,078,837.00
Customer Fees $506,788.00 $579,824.00 $1,004,874.00
Other $39,567.00 $31,362.00 $107,370.00
Interest $1,541.00 $186.00 $162.00
Total Revenue $1,165,065.00 $1,244,261.00 $2,191,243.00
Expenses
Program services
Payroll and benefits $417,004.00 $520,069.00 $915,787.20
Supplies $125,101.20 $171,622.77 $320,525.52
Rent and Utilities $150,000.00 $150,000.00 $150,000.00
Telephone $24,000.00 $24,000.00 $24,000.00
Other $117,903.00 $79,888.00 $115,999.00
Management and other $351,000.00 $371,101.00 $445,819.00
Total Expenses $1,185,008.00 $1,316,681.00 $1,972,131.00
Excess revenues of expenses ($19,943.00) ($72,420.00) $219,112.00
Customer Count 5962 6821 11822
· Post your final answers as a Microsoft® Word attachment.
· Show your work!
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• Calculate the fixed costs, variable costs, and break-even point for the XYZ Corporation listed in Appendix D
To calculate the fixed cost, variable costs, and break-even point for the program, we need to analyze the financial data provided. Here are the steps to follow:
Step 1: Identify Fixed Costs
Fixed costs are expenses that remain constant regardless of the level of program activity or revenue. In the given data, the following expenses can be considered fixed costs:
- Rent and Utilities: $150,000.00 per year
- Telephone: $24,000.00 per year
Step 2: Calculate Variable Costs
Variable costs are expenses that change based on the level of program activity or revenue. To calculate the variable costs, we need to subtract the fixed costs from the total expenses for each year. The remaining expenses can be considered variable costs. Here are the calculations for each year:
- For 2002:
Total Expenses: $1,185,008.00
Fixed Costs: $150,000.00 + $24,000.00 = $174,000.00
Variable Costs: $1,185,008.00 - $174,000.00 = $1,011,008.00
- For 2003:
Total Expenses: $1,316,681.00
Fixed Costs: $150,000.00 + $24,000.00 = $174,000.00
Variable Costs: $1,316,681.00 - $174,000.00 = $1,142,681.00
- For 2004:
Total Expenses: $1,972,131.00
Fixed Costs: $150,000.00 + $24,000.00 = $174,000.00
Variable Costs: $1,972,131.00 - $174,000.00 = $1,798,131.00
Step 3: Calculate the Break-Even Point
The break-even point is the level of program activity or revenue where the total revenue equals the total expenses. It can be calculated by dividing the fixed costs by the contribution margin, where the contribution margin is the difference between the selling price (revenue per customer) and variable costs per customer.
To calculate the break-even point, we need the revenue per customer. From the given data, the total revenue for each year and the customer count are provided. We can divide the total revenue by the customer count to get the revenue per customer.
- For 2002:
Revenue per customer = $1,165,065.00 / 5962 = $195.40
- For 2003:
Revenue per customer = $1,244,261.00 / 6821 = $182.25
- For 2004:
Revenue per customer = $2,191,243.00 / 11822 = $185.07
Now, we can calculate the break-even point using the formula:
Break-even point = Fixed Costs / (Revenue per customer - Variable Costs per customer)
- For 2002:
Break-even point = $174,000.00 / ($195.40 - Variable Costs per customer)
- For 2003:
Break-even point = $174,000.00 / ($182.25 - Variable Costs per customer)
- For 2004:
Break-even point = $174,000.00 / ($185.07 - Variable Costs per customer)
To find the variable costs per customer, divide the total variable costs for each year by the customer count.
- For 2002:
Variable Costs per customer = $1,011,008.00 / 5962
- For 2003:
Variable Costs per customer = $1,142,681.00 / 6821
- For 2004:
Variable Costs per customer = $1,798,131.00 / 11822
After calculating the break-even point for each year, you can provide your final answers as a Microsoft® Word attachment.
Remember to show your work and include all calculations.