Break Even Analysis For Choosing Facility Location Break even analysis implies to finding ‘Break-even Point’ at which revenues and costs agree exactly. Break-even point (BEP) is the volume of output at which neither a profit is made nor a loss is incurred. Break-even analysis is a technique widely used by production management and management accountants. ... Total variable and fixed costs are compared with sales revenue in order to determine the level of sales volume, sales value or production at which the business makes neither a profit nor a loss (the "break-even point").

1. FOR CHOOSING FACILITY LOCATION
BY
Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181
BREAK EVEN ANALYSIS

2. FACTORS AFFECTING LOCATION PLANNING
Break Even Analysis
Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181
CONTROLLABLE
 Proximity to Markets
 Supply of Materials
 Transportation Facilities
 Infrastructure Availabilities
 Labour and Wages
 Capital

3. FACTORS AFFECTING LOCATION PLANNING
Break Even Analysis
Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181
UNCONTROLLABLE
Government Policies
Climatic Conditions
Supporting Industries and Services
Community and Labour Attitudes
Community Infrastructure and Amenity

4. METHODS TO EVALUATE LOCATION
Factor Rating Method
Load Distance Model
Centre of Gravity Approach
Transportation Method
Break-Even Analysis
Break Even Analysis
Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181

5.  Break even analysis implies to finding ‘Break-even Point’ at which revenues
and costs agree exactly.
 Break-even point (BEP) is the volume of output at which neither a profit is
made nor a loss is incurred.
 BEP = F / (S-V) units
Where F = Fixed Cost
S = Selling Price
V = Variable Cost Per Unit
Break Even Analysis
Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181
BREAK EVEN ANALYSIS

6. Fixed Cost
 Facility Cost
 Furniture and Machinery Cost
 Insurance, Interest Expense, Property Taxes, Assets, Depreciation of Assets
 Utilities Expenses, Building Rent
 Salaries irrespective of Work Hours, Equipment Rental
Variable Cost
 Raw Materials,
 Production Supplies,
 Delivery Charges and Shipping Charges
 Commissions and Performance Bonuses
Break Even Analysis
Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181
BREAK EVEN ANALYSIS

7.  Method of Cost- Volume analysis used for
Industrial Locations
 Amount of goods required to be sold to just
cover cost
 Used when cost of each location is known
Break Even Analysis
Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181
LOCATIONAL BREAK-EVEN ANALYSIS

8. STEPS IN BREAK-EVEN ANALYSIS
Step 1: For each location, determine fixed and variable cost
Step 2: Plot the total cost of each location on one graph
Step 3: Identify ranges for which each location has lowest total cost
Step 4: Solve algebraically for the break-even points over the identified
ranges
Break Even Analysis
Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181

9.  Total Cost = F + cQ
 Total Revenue = pQ
 Break-Even is where Total Revenue = Total Cost
Q= F/(p-c)
where Q = break-even quantity
p = price per unit
c = variable cost per unit
F = Fixed Cost
Break Even Analysis
Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181
FORMULA OF BREAK EVEN ANALYSIS

10. BREAK EVEN ANALYSIS FOR FACILITY LOCATION
PLANNING - Example
Break Even Analysis
A sports goods manufacturing company intends to set up a facility to produce
Badminton racquets. It is considering sites X, Y & Z for this purpose. Cost data for the
sites are given in below table.
If the Selling Price is Rs. 300 per racquet and the annual demand is 3000 units which
site would you recommend ?
SITE FIXED COST VARIABLE COST
X Rs.50,000 Rs.135
Y Rs.100,000 Rs.110
Z Rs.120,000 Rs.120
Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181

11. BREAK EVEN ANALYSIS FOR FACILITY LOCATION
PLANNING - Solution
Break Even Analysis
Varun Sarang 133, Pankaj Sawant 138, Amol Shinde 156, Deepali Singh 159, Kartik Tikar 172, Ulka Wavle 181

12. THANK YOU