4. CVP Analysis

Development of the case

The case assumes students will open a surgical mask making unit on the Galpagos Island in South America. We have gone through the existing surgical mask making unit,read industry report, and have done some research on expected minimum cost to be incurred in operating the business. A surgical mask also known as procedure mask, medical mask or simply as a face mask,is meant to be worn by health professionals during nursing to catch the bacteria shed in liquid dropollets and aerosols from the wearers mouth and nose. Surgical masks are disposable devices that cowl the mouth and nose throughout medical procedures. They prevent the spread of infection between sick and well persons. The face mask making business has a great scope of expansion as compared to a home-based business and offers great returns. With the surge in pollution levels and viros-prone lifestyles, wearing masks while stepping out has become mandatory. Starting a mask making business the right way will help you thrive in the longrun.

Cost needed to make surgical mask:

Assume number of units sold 35000 unit

Fixed cost:

Rent Mask making Machinery Machinary (Packing) Cleaning Packing Materials Advertisement Water Insurance

$1500per month $30,000 $5,000 $100 per month $200 Per month $1200 per year $300 per month $5000 per annum

Required of the case:

In order to answer the questions below, you will need to make assumptions,

Using the above information, determine the unit of surgical mask you will need to sell to achieve the break- even . In order to do this, you will need to set a sales price per unit aswell as variable cost per unit. (Hint: Keep all costs on yearly basis throuout your analysis)

Now build in a salary for yourself and determine the amount of surgical mask you will need to sell to break even.

Support your answer with illustrating the Break even graph.