Unit66

4.1 Break-even Analysis for Herbalife company this just example what needs to be done below .

• When you will break-even? • Break-even Table/Chart   • Explanation of the Break-even Table/Chart  

 TIP Here is a good example of a break-even analysis. This should assist you in your own completion of this section. NOTE: You do not need to use the examples below – look online and use whatever break-even and sales forecast templates you wish to use.  

 NOTE: For annual break-even analysis – ensure you continue your analysis until your profit is 0 or positive. If you end a year with a negative income then that must be carried over to the next year and added to Fixed Costs – thus your break-even point will be further into the future. (Someone must pay for debts owed!) If you conduct a monthly break-even then you must provide the number of months until break even. This will correspond to your sales estimates. 

 EXAMPLE: 4.1 Break-even Analysis 

 First year sales revenue for XXX is estimated to be $48,000,000. The average sales price is $100 per unit with the variable expense per unit at $75. This results in a contribution margin of $25 per unit. The sales volume in the first year is estimated to be 480,000 units. Estimated fixed costs for the first year are $20,000,000. Using the contribution margin method, estimated losses in the first year will be $(8,000,000). (Note: this information is for internal use only.)  

YEAR 1  TOTAL PER UNIT Sales (480,000 items) $48,000,000  $100  Less variable expenses $36,000,000  $75     Contribution Margin $12,000,000  $25  Less fixed expenses $20,000,000      Net operating income ($8,000,000)  

YEAR 2  TOTAL PER UNIT Sales (1,200,000 items) $120,000,000  $100  Less variable expenses $90,000,000  $75     

 Brand Extension Marketing Plan 9 

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Contribution Margin $30,000,000  $25  Less fixed expenses $28,000,000      Net operating income $2,000,000  

At this rate, breakeven will be reached when sales reach 1,120,000 units: 28,000,000 / $100-$75 = 1,120,000 units. This is estimated to take place in the second year. Break-even analysis assumes per-unit wholesale revenue will remain at $100 average. Variable costs are $75 per unit.  

BREAK EVEN  TOTAL PER UNIT Sales (1,1200,000 items) $11,200,000  $100  Less variable expenses $84,000,000  $75     Contribution Margin $28,000,000  $25  Less fixed expenses $28,000,000      Net operating income $0   

4.2 Sales Forecast: 1st year by month; 2nd and 3rd years by quarter (refer to your Kotler text) • Sales forecast and timing – include charts showing the following: Remember that some products have sales cycles – and whether you are planning for any growth in the market for increased promotions. 

 Year 1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec                                           

  Year 2 1st Q 2nd Q 3rd Q 4th Q  Year 3 1st Q 2nd Q 3rd Q 4th Q                                     

• Risks – this is a CRITICAL PART OF ANY MARKETING PLAN – so be sure to give this topic ample attention. 

• Most important components of sales performance – this is a CRITICAL PART OF ANY MARKETING PLAN – so be sure to give this topic ample attention.