Information required for the following questions:

Estimated Costs = 500,000

Target Profit = 1,000,000

1.) Explain 'Break Even Analysis'.

2.) What are the benefits and disadvantages of break-even analysis?

3.) Create a break-even analysis for your business. What can your business learn from your break-even based on your estimated costs?

4.) Estimate the target profit for Year 1 ( or Year 2 ) and calculate how many units have to be sold to achieve this target profit. What should be the sales revenue in order to achieve this target profit?

5.) Explain 'margin of safety' .

6.) Calculate the margin of safety for your business based on your target profit.

7.) Discuss how changes in costs, volume and selling price may affect the business' profitability (variance analysis). Support the discussion with the relevant calculations.

8.) Comment briefly on the level of risk there is for this business' profit based on your variance analysis and margin of safety calculations.

iection 3-Cost-Volume-Profit Analysis (individual, 60\%) - The student defines and explains the purpose of 'break-even analysis' plus at least two of its benefits and at least two of its disadvantages. - The student correctly applies break-even analysis calculations using inputs for sales, margin, costs and profit which are credible for the business in question and there is evidence of research to support some or all of the inputs and assumptions used. - The student makes a credible estimate for 'target profit' and correctly calculates the sales volume and value required to achieve it, using the same inputs used for the breakeven analysis. - The student defines and explains the concept of 'margin of safety.' - The student correctly calculates the margin of safety using the breakeven and target profit figures as above. - The student clearly explains and illustrates with examples of how changes in cost, volume and price will affect the start-up's profitability (variance analysis). - The student comments briefly on the level of risk there is for this business' profit based on variance analysis and margin of safety calculations above