Break Even Analysis Example

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This section is created to see the financial aspect of the marketing plan. We will consider break-even analysis, sales forecasts, expense forecast in order to meet the marketing strategy. Break-even analysis determines the point at which revenue received equals the costs associated with receiving the revenue. Break-even analysis calculates what is known as a margin of safety, the amount that revenues exceed the break-even point. This is the amount that revenues can fall while still staying above the break-even point. Expense forecasts are mostly for staff required to do the marketing activities such as advertisements, web site developments, providing printed materials. 4.1 Break-Even Analysis The break-even analysis for iLoveMyWater shows that $6,928 will be required in monthly sales revenue or 347 units (Table 4.1) to reach the break-even point where profits equal zero. TABLE 4.1Break-Even Analysis Break - Even Analysis Parameters Monthly Units Break-Even 347 units Monthly Sales Break-Even $6,927.59 Per Unit Average Revenue $19.99 Per Unit Variable Cost $3.60 Estimated Monthly Fixed Cost $5,680.00 We computed these break-even parameters based on assumptions on variable costs, fixed costs (Table 4.1) and used the following formula: Price x Units – Variable Cost x Units – Fixed costs = Profit; or…show more content…
In order to meet the marketing plan’s objectives, iLoveMyWater needs to monitor and report about its performance metrics such as amount of revenue, marketing expenses, customer satisfactions, customer retention rate, and new-product development. These metrics need to be monitored not only annually but also monthly, especially revenues and expenses. The company should execute a top-to-bottom quality management approach in order to have high costumer satisfaction and also have high costumer retention rate. Lastly, iLoveMyWater contently has to control and improve the quality of their
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