ASSIGNMENT 2

HRP 111
Submitted to Deepak Sharma

Submitted By
Ramandeep Kaur A00118545
Jagdish Singh Dhindsa A00115263
Kamal Khatkar A00115358
Kamaljit Kaur Dhaliwal A00115348
Jaspreet Singh Sandhu A00115358
Table of Contents

Introduction....................................................................................................................................3

Queensway Food Truck................................................................................................................3

Mathematical equation of Break-Even point..........................................................................4

Contribution Margin.................................................................................................................5

Cost-Volume-Profit (CVP) graph.............................................................................................5

Conclusion......................................................................................................................................6

References.......................................................................................................................................7
Introduction

The article attempts to examine the break-even point of The Queensway Food Truck. To

consider the revenue forecast, it forecasts the variable cost and the retail price per product.

Queensway Food Truck

The Queensway Food Truck is a portable food truck that will deliver fast foods across the city at

reasonable prices. It hire permanent employee like chefs and staff to cater the food services.

Additionally it hires students at the peak season to deliver food beverages. The Queensway Food

Truck is an Small Medium Enterprises (SME) that contributes to the large economy. The fixed

cost of the food truck is based on the overheard costs of the business (Liu & Tyagi, 2017). The

fixed cost of the food truck is presented below in table (1).

Fixed Costs Cost ($)

1 Food Van 3500
2 Registration 450
3 Licenses 550
4 Marketing 250
5 Parking 250
Total 5000
Table (1): Fixed Cost of Queensway Food Truck
The variable cost of the food truck is based on the costs of the food and beverages of the

business (Liu & Tyagi, 2017). The variable cost of the food truck is presented below in table (2).

Variable Costs Cost ($)

1 Raw Materials 150
2 Paper Plates 40
3 Napkins 25
4 Additional 15
Staff
5 Miscellaneous 35
Total 265
Table (2): Variable Cost of Queensway Food Truck
The sales price of the menu of the food truck is dependent on the combination of the food

offered. There are three combination of food menu. These are represented on the table (3) below.

Sales Price Cost ($)

1 Lunch Combo 45
2 Evening 30
Sneaker
3 Dinner Meal 45
Total 120
Table (3): Variable Cost of Queensway Food Truck
Mathematical equation of Break-Even point

Break even analysis is done to estimate the minimum sales volume to overcome the losses which

may be incurred by a company (Since, 2020). Profit measurement of cost amount dictates how

many units of a commodity have to be delivered so that the corporation hits its break-even stage .

According to the mathematical representation of the break even point, the fixed costs, the

variable costs and the sales price are required to estimate the break even point. The mathematical

representation of the Break-Even Point is

Break−Even Point=¿ Costs (Sales Price per unit−Variable costs per unit )

The fixed cost of the Queensway Food Truck is $5000 and that the variable cost is $265. The

sales price for the three combinations – Lunch Combo, Evening Sneaker and Dinner Meal is $45,

$30 and $45 respectively. The total sales price is $120. As per the formula expressed above, the

break – even point calculated is

Break−Even Po∫ ¿ $ 5000 ($ 400−$ 120)

Break−Even Point=34

Thus, the break-even point is $34. It means the Queensway Food Truck must sell over 34 units to

reach the break even point.

Contribution Margin

The contribution margin is defined as the disparity between a commodity's purchase cost and the

variable costs involved with the manufacturing and distribution phase of the product

(Heinzelmann, 2017). As per the formula, the contribution margin is represented as below

Contribution Margin=Selling Price per unit−variable cost per unit

Thus, the contribution margin of the Queensway Food Truck is calculated below.

Contribution Margin=$ 265−$ 120

Contribution Margin=$ 145

The contribution margin is $145.

Cost-Volume-Profit (CVP) graph

The Cost Volume Profit Analysis is given below in table (4).

Chart Title
150000

100000

50000

0
1 2 3 4 5

-50000

-100000

Fig (1): CVP Graph

Total Unit Total Fixed Total Variable Total Sales Profit
Cost Cost Cost Value
 0 5000 0 5000 0 -5000
100 5000 26500 31500 12000 -19500
200 5000 53000 58000 24000 -34000
300 5000 79500 84500 36000 -48500
400 5000 106000 111000 48000 -63000

Total Fixed Cost 5000

Variable 265
Cost
Sales Price 120
Table (4): CVP Analysis

Conclusion

The essay aims to analyze the break-even point of the food truck named The Queensway Food
Truck. It projects the variable cost and the selling price per unit to understand the sales forecast.
References

Heinzelmann, R. (2017). Accounting logics as a challenge for ERP system implementation: a

field study of SAP. Journal of Accounting & Organizational Change.

Sintha, L. (2020). Importance of Break-Even Analysis for the Micro, Small and Medium

Enterprises. International Journal of Research-Granthaalayah, 8(6).

Liu, Y., & Tyagi, R. K. (2017). Outsourcing to convert fixed costs into variable costs: A

competitive analysis. International Journal of Research in Marketing, 34(1), 252-264.

Navaneetha, B. N., Punitha, K. P., Joseph, R. M., Rashmi, S. R., &Aishwariyaa, T. S. (2017). An

analysis of cost volume profit of Nestlé limited. Management and Administrative

Sciences Review, 6(2), 99-103.