Break Even Analysis

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  • Published : November 13, 2006
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Contribution Margin and Breakeven Analysis Simulation

MBA 503
University of Phoenix

Contribution Margin and Breakeven Analysis Simulation
Maria Villanueva, the Chief Financial Officer of Aunt Connie's Cookies, must make several decisions in the "Contribution Margin and Breakeven Analysis" Simulation in order to maintain the success of the company. These decisions involve applying the concept of both contribution margin and breakeven analysis to make the best decision for the company. When evaluating the financial position of the company, Maria must analyze the contribution margins of the products supplied by Aunt Connie's Cookies to determine the direction of the company. Maria must also evaluate the breakeven point of the company when making a decision on whether or not to purchase another company. According to Marshall, McManus and Viele, the contribution margin is defined as the contribution to fixed expenses and operating income from the sale of product or provision of service (2004). While the breakeven point for a company is defined as the point of revenue in which there is no profit or loss for the company. Both of these concepts will help Maria make the best decisions for the company during the course of the simulation. When applied to a business, the concepts of contribution margin and breakeven analysis can assist a company in making the best decision for a company to stay ahead financially. When using the concept of contribution analysis, Maria can determine whether or not to accept the bulk order of cookies. In the "Contribution Margin and Breakeven Analysis" Simulation, Maria must understand that according to the contribution margin the company will benefit by producing the most profitable product (UOP Simulation, 2006). For Aunt Connie's Cookies, the most profitable product is its lemon crème cookies. By producing more of the lemon crème cookies, Maria can expect an increase in the company's profits. Since the lemon crème cookies...
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