Describe break-even analysis to inform your recommendation

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Reference no: EM133784488

Assignment: Cyber Security

Choose Alternatives with Break-Even Analysis

Books and Resources

1. Blank, L., & Tarquin, A. (2018). Engineering economy (8th ed.). McGraw Hill.
Read Chapter 13, pp. 354-376.

2. Vernimmen, P., Quiry, P., Dallocchio, M., Le, F. Y., & Salvi, A. (2017). Corporate finance: Theory and practice (5th ed.). Wiley.
Read Chapter 10, pp. 167-172.

Instructions

The Googolplex CEO wants to develop and sell a new outpatient heart-rate monitoring system. Engineers expect the new heart-rate monitoring system to have a profitable life between 1 and 5 years. Help the CEO to determine the break-even number of units that must be sold annually (without any return) to realize the break-even payback. The cost and revenue estimates are as follows:

Fixed costs: Initial investment of $800,000 with $10,000 annual operating cost.

Variable cost: $80 per unit

Revenue: Twice the variable cost for the first 5 years and 50% of the variable cost thereafter. In addition, assume a 5% credit to total revenue calculation based on savings associated with detecting heart problems before they become life-threatening.

Based on these inputs, write a paper describing the break-even analysis to inform your recommendation on the heart-rate monitoring system to the CEO. Use the graphical break-even analysis figure provided in the introduction as a template. Ensure the graphical break-even analysis and paper capture the following:

1. Variable costs

2. Fixed costs

3. Total costs (Variable and Fixed costs combined)

4. Revenues

5. Credit due to early heart problem detection

6. Clearly identified break-even point

7. Clearly identified X-axis (# units) and Y-axis (costs in dollars)

8. Discussion on why break-even analysis is important and necessary for this problem.

9. Recommendation based on break-even analysis findings.

Reference no: EM133784488

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