SFU-008 - Module 3 (Simulation)

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Materials Needed

Worksheet

Computer with internet access

Spreadsheet software

Calculator

Sample financial data

You'll need the worksheet to complete this module and submit your work!The workbook is available to fill in alongside the steps, you'll just need to download it once you've answered everything

(e.g. Microsoft Excel or Google Sheets)

(Provided)

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Simulation

This simulation will provide hands-on experience in conducting a Break-Even Analysis through data gathering, analysis, and creation of a comprehensive financial report for a hypothetical business scenario. As a reminder, below are the steps we're going to take in order to complete the simulation. There will be timers on each step, but this is simply there for guidance and there is no pressure to finish before or after the time is up! If you're ready, click the 'Next' button below to get going!

Preparation Task (10 minutes)

Research Task (30 minutes)

Analysis Task (40 minutes)

Create Task (25 minutes)

Document and Present (15 minutes)

Reflection Task (10 minutes)

Expected Outcome

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Preparation task (10 minutes):

You are an Accountant working for a major bank, such as Barclays or Nationwide. You’ll carry out a task, focusing on Break-Even Analysis, that an Accountant in this environment is expected to complete. That starts with preparation: Objective: Review the key concepts of Break-Even Analysis. If you haven’t come across this term before, Break-Even Analysis is an accounting process for determining when a company, product, or service will be profitable. Essentially, it calculates how many products or services you need to sell to cover your costs. Your first task in this simulation is to understand this process fully.

Step one: research and understand the following key concepts:

• Fixed costs
• Variable costs
• Contribution margin
• Break-even point
• Volume
• Selling price

Input your dataon the next page

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Preparation task (10 minutes):

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Research task (30 minutes):

Gathering financial data is essential to assess a business’s financial health. You’ll need to understand how assumptions about selling prices, variable costs and fixed costs might change provide critical insight when advising clients. Objective: Gather the relevant data required for conducting a Break-Even Analysis. Task:

Step one: access and study the provided sample financial data for a hypothetical small business that is a client of your organisation. This data includes details on:

• Fixed costs (rent, salaries, insurance etc.)
• Variable costs (cost per unit)
• Selling price per unit

Step two: answer the following questions:

1. Why could the selling price assumption change?
2. Why could the variable costs assumption change?
3. Why could the fixed costs assumption change?

View the data

To develop your expertise, you might want use publically available financial data to examine other company accounts and carry out a similar exercise to give you further practice examples and experience in conducting this type of analysis. This, however, will not be assessed within this simulation.

Input your dataon the next page

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Research task (30 minutes):

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Analysis task (40 minutes):

Next, you’ll need to calculate and analyse the break-even point across various scenarios - this is vital for evaluating a business’s financial stability. Objective: Calculate the break-even point and analyse its implications for the business. Task:

Step two: carry out three different scenarios, changing the selling price, variable costs and fixed costs. Explain the effect of these changes on both the break-even units and the break-even revenue (rounded to the nearest £1000).

• Adjust the selling price by +5% and -5%
• Adjust the total variable costs by +15% and -15%
• Adjust the total fixed costs by +10% and -10%

Step three: consider various scenarios by adjusting key variables to observe how changing multiple factors influence the break-even point.

Step one: Calculate the break-even point using spreadsheet software. Do this using the relevant data provided in both units and revenue terms, using the following formulae: We recommend using spreadsheet software such as Google Sheets or Microsoft Excel to carry out this task. You can find these here, along with some guidance, if you need it: Google Sheets: Microsoft Excel:

Step four: detail what implications these changes have on:

• Selling price
• Variable cost
• Fixed cost

Step five: analyse the combined impact of adjusting the three elements (Selling price, Variable cost, Fixed cost) on the units to achieve break-even.

Open

Open

BEP (units) =

Fixed Costs

Selling Price - Variable Costs per unit

BEP (revenue) = BEP (units) x Selling Price

Input your dataon the next page

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Analysis task (40 minutes):

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Create task (25 minutes):

Working as an Accountant within a bank requires you to develop clear and concise financial reports - in this case, summarising the break-even analysis. This is essential for communicating key insights to stakeholders, as this report will provide actionable recommendations. Objective: Develop a financial report summarising the break-even analysis and providing recommendations. Task:

Step one: based on the analysis, create a concise report that includes:

• An introduction to the business scenario
• The break-even calculations
• Scenario analysis
• Recommendations for pricing, volume or cost control strategies

Ensure the report is professionally formatted and includes visual aids (graphs, charts) to illustrate key points. You should aim for a well-structured financial report that effectively communicates the results of the Break-Even Analysis and offers actionable business insights. This report should be no more than 1-2 pages.

Input your dataon the next page

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Create task (25 minutes):

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Document and Present (15 minutes):

Now, it’s expected that you will prepare an appropriate presentation based on your financial report, justifying recommendations to decision-makers. This ensures that your findings lead to actionable business strategies. Objective: Communicate the findings and recommendations effectively. Task:

Step one: compile your financial report and prepare a brief PPT presentation summarising the key findings. You should aim to create a successful presentation that clearly conveys the Break-Even Analysis results and justifies the recommended business actions.

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Document and Present (15 minutes):

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Reflection task (10 minutes):

Reflecting on the process offers valuable insights for refining future break-even analyses. This reflection enables you to improve your approach as an Accountant, ensuring accurate and effective financial assessments in future scenarios. Objective: Reflect on the entire process. Task:

Step one: answer the following questions:

• How has this experience contributed to your understanding of break-even analysis and accounting?
• What were the most significant challenges you faced throughout this task? How did you address them, and what did you learn from these challenges?
• Reflecting on the entire process, what improvements would you suggest for future analyses? How could the process be more efficient or effective?

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Expected Outcome

By the end of this activity, you will have gained practical experience in conducting a Break-Even Analysis, including data collection, scenario analysis, and creating a financial report. This will enhance your ability to perform Break-Even Analyses in real-world situations, a crucial skill for any Accountant in managing and advising on business finances.

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