Total Variable Cost Analysis Paper

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You are a cost management consultant and you have been asked by a small business owner for business advice. Your client owns a chain of small, local operations that support larger caterers for special events. Your client provides the tents for outside events, the soft drinks and snacks for the children of events, along with floral and other decorative arrangements.
This kind of business is extremely competitive, and your client would like to know how far she can lower her prices without losing money. Currently, the chain of operations has $22,500,000 of revenue from 5,000 events that they have serviced.
The cost data she can provide you includes:
• Floral costs, $200 per event,
• Table arrangements, $100 per event,
• Soft drinks and children …show more content…
You begin your analysis, of course, with a break-even calculation.

Break even calculation.
First, I will match all the costs together, variable, fixed and mixed costs.

Variable costs are costs are that change based on the level of output. These costs increase or reduce based on production level. I refer to them as running costs. I will add up the values for variable costs to get the total variable costs.
Variable Costs
Floral costs $200
Table arrangements $100
Soft drinks and children snacks $500
Wage for Temporary staff + $1,800
Total variable costs $2,600

Fixed costs are costs that do not change no more the change in output. I refer to them as permanent costs. Examples are rent, interest expense, insurance costs. I will add up all the fixed costs below to get the total fixed costs.
Fixed Costs
Annual costs of Tent $500,000
Annual costs of Trucks …show more content…
The break-even point in units 3 is the number of units that must be sold to achieve zero profit. The break-even point in sales dollars4 is the total sales measured in dollars required to achieve zero profit. If a company sells products or services easily measured in units (e.g., cars, computers, or mountain bikes), then the formula for break-even point in units is used. If a company sells products or services not easily measured in units (e.g., restaurants, law firms, or electricians), then the formula for break-even point in sales dollars is
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