Breakeven Point Analysis

Breakeven point = total fixed expenses

Weighted average selling price-weighted variable expenses

**Total Fixed Costs ****$ **2,000

**Forecast net profit: **0

Coffee | Muffins | Light meals | |

Sales price per unit
| $3 |
$2 |
$4 |
---|---|---|---|

Variable cost per unit
| $0.5 |
$1 |
$2 |

Expected sales ratio

Cofee: 20%;

Muffins: 30%;

Light meals: 50%

Weighted average selling price:

= ($3 × 20%) + ($2 × 30%) + ($4× 50%) = $3.2

Weighted average variable expenses:

= ($0.5 × 20%) + ($1 × 30%) + ($2 × 50%) = $1.4

Therefore

= $2,000 / $3.2 – $1.4 =111 Units to breakeven point

With this analysis, I will be able to know how to set my prices, in order to achieve more. In this case, I might need to adjust the prices upward a little bit, because of the high number of units to be sold so as to achieve the breakeven point.