Boeing-Breakeven Analysis

Topics: Variable cost, Costs, Management accounting Pages: 1 (322 words) Published: August 10, 2008
Boeing Co.-Breakeven Analysis

The Boeing 737-900ER was released in July 2005 and made its first delivery to Indonesia's Lion Air in 2007. The price of the 737-900ER ranges from $74,000,000-$89,000,000 per plane. The purpose of this assignment is to apply breakeven analysis to a project within Boeing using data obtained from the company’s website as well as fabricated information used to apply the tool. The fictitious information was used only because Boeing didn’t provide a breakdown of costs per program.

Let’s assume that Boeing's annual fixed cost for the 737-900ER are $980 million, and its variable cost per airplane is $65 million. In order to calculate the break even point, the contribution margin for each plane must first be calculated as follows (Note: Assuming the price of the plane is $89,000,000): 1.Sales price - Variable cost per plane: 89-65=24 million

Next, since the total fixed cost is given, the break even point can be calculated. 2.Break even point= 980/24= 40.83 planes
Thus, Boeing needs to sell approximately 41 airplanes in order to achieve their break even point.

Module 2: Session Long ProjectPage 3

In terms of sales dollars, the figure will be: 40.83 x 89 million= 3634.17 million or 3.634 billion dollars.
In conclusion, the 737-900ER’s overall break even point was low, indicating that the overall operations of the project are within a reasonable scope and there’s no huge threat of potential difficulties within the company, unless the break even point reaches their sales volume, which could cause a problem if they become limited on resources. Break even point analysis is a great tool transmit helpful information to companies, but its inability to illustrate how profit changes as activity changes within the organization calls for other methods to assist in the overall assessment.
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