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Break-Even Analysis for Manufacturing Costs

The document discusses break-even analysis for a company deciding whether to produce a product internally or outsource production. It provides manufacturing fixed costs of $234,000 and variable costs of $2 per unit for internal production. Outsourcing costs $3.50 per unit. The break-even point is calculated as 156,000 units, which is the quantity where total costs of internal and outsourced production are equal. Charts show the total costs of both options at different production quantities.

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13 views5 pages

Break-Even Analysis for Manufacturing Costs

The document discusses break-even analysis for a company deciding whether to produce a product internally or outsource production. It provides manufacturing fixed costs of $234,000 and variable costs of $2 per unit for internal production. Outsourcing costs $3.50 per unit. The break-even point is calculated as 156,000 units, which is the quantity where total costs of internal and outsourced production are equal. Charts show the total costs of both options at different production quantities.

Uploaded by

Minza
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

Break-Even point (Goal Seek)

Don't forget to name the cells!

Nowlin Plastics

Parameters
Manufacturing Fixed Cost $234,000.00
Manufacturing Variable Cost per Unit $2.00

Outsourcing Cost per Unit $3.50

Model
Quantity 156,000 X

Total Cost to Produce $546,000.00 Y1

Total Cost to Outsource $546,000.00 Y2

Savings due to Outsourcing $0.00

Chart Title
$12.00

$10.00

$8.00

$6.00

$4.00

$2.00

$-
0 00 0 00 0 00 0 00 00 00 0 00 00
25 50 75 00 50 50
0
75 00
1 12 1 1 20 2
Production equation QTY 25000 50000
TFC + VC*X = Y1 Savings by O $0.00

Outsourcing Equation
OC * X = Y2

Breakeven point Qty Savings by O


$0.00
TFC + VC*X = OC *X 25000
TFC = OC*X - VC*X 50000
TFC = (OC -VC) *X 75000
TFC /(OC - VC) = X 100000
156000 LHS 125000
150000
175000
200000
225000
250000
275000
300000

Qty Cost to make Cost to O


Chart Title $546,000.00 $546,000.00
$12.00 25000
50000
$10.00 75000
$8.00
100000
125000
$6.00 150000
175000
$4.00
200000
$2.00 225000
250000
$-
00 00 00 00 00 00 00 00 00 00 00 00
275000
0 0 0 0 50 0 0 00 0 0 50 0
25 50 75 1 00 12 1 50 1 75 20 2 25 2 50 27 3 00 300000
75000 100000 125000 150000 175000 200000 225000 250000

$0.00 2.75 3 3.25 3.5 3.75 4


25000
50000
75000
100000
125000
150000
156000
175000
200000
225000
250000
275000
300000
275000 300000
Gambrell Manufacturing
Parameters
Component ID 570 578 741 755
Inventory On-Hand 5 30 70 17
Order Up to Point 100 55 70 45
Cost per unit $4.50 $12.50 $3.26 $4.15

Fixed Cost per Order $120

Minimum Order Size for Discount 50


Discounted to 100%

Model

Component ID 570 578 741 755


Order Quantity 95 25 0 28
Cost of Goods $427.50 $312.50 $0.00 $116.20

Total Number of Orders 3

Total Fixed Costs $360.00


Total Cost of Goods $856.20
Total Cost $1,216.20

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