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Variable and Fixed Costs The following table presents the variable and fixed costs incurred in 2006. It provides an example for what types and amounts of fixed and variable costs a company (i.e., gym) may incur in a given year. Please note that because variations in the variable and fixed costs are expected to incur each year, the budget and break-even unit calculations need to be updated every year. Table 1. Variable and Fixed Costs Incurred in 2006 Break-even Analysis Using the costs incurred in 2006 presented in Table 1, calculate pessimistic and optimistic scenarios for break-even units. In this case, a break-even unit indicates the minimum number of members a gym needs to achieve in order to cover the total costs given the average price level it is charging for membership. Any member above the break-even unit will provide profit. Break-even Analysis Using the costs incurred in 2006 presented in Table 1, calculate pessimistic and optimistic scenarios for break-even units. In this case, a break-even unit indicates the minimum number of members a gym needs to achieve in order to cover the total costs given the average price level it is charging for membership. Any member above the break-even unit will provide profit. The pessimistic scenario is based on the average number of members (327) in 2006. The optimistic scenario is based on the maximum member capacity (750) the gym will have. The descriptions, formula, pessimistic and optimistic break-even unit calculations are provided below: Descriptions BEV: Break-even Volume (unit) TVC: Total Variable Cost TFC: Total Fixed Cost Average Price: $400 for one year M: Number of Members (units) Pessimistic: 327 average members in one year Optimistic: 750 maximum members in one year Formula BEV=PMTVCTFC Show ALL Calculations: Pessimistic Scenario: BEV = Interpretation