SFU-008 - Module 3 (Simulation)
Springpod Team
Created on September 17, 2024
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Transcript
This simulation should take you just over two hours, and is divided into the following sections:
- A preparation task, which should take you up to 15 minutes
- A 30 minute research task
- A 30 minute analysis task
- A 30 minute create task
- A 10 minute document and presentation activity
- And finally, a reflection task, which should take you around 10 minutes.
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Materials Needed
Computer with internet access
Spreadsheet software
Calculator
Sample financial data
(e.g. Microsoft Excel or Google Sheets)
(Provided)
Preparation Task (10 minutes)
Research Task (30 minutes)
Analysis Task (30 minutes)
Create Task (20 minutes)
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!
Document and Present (15 minutes)
Reflection Task (10 minutes)
Expected Outcome
Simulation
Simulation
PREPaRAtion task
What is a Break-Even Analysis?
A Break-Even Analysis is an accounting process for determining at what point a company, product or service will be profitable. Essentially, it calculates how many products or services you need to sell to cover your costs.
Key concepts
Preparation: Understanding key concepts of a Break-Even Analysis
Search for recent market reports, articles, or statistics related to your chosen market segment. Use sources like Statista, Nielsen, or industry-specific publications.
Simulation
research task
Research: Gather the relevant data required for conducting a Break-Even Analysis.
Search for recent market reports, articles, or statistics related to your chosen market segment. Use sources like Statista, Nielsen, or industry-specific publications.
Market Reports
Search for recent market reports, articles, or statistics related to your chosen market segment. Use sources like Statista, Nielsen, or industry-specific publications.
Access and study the spreadsheet provided at the end of this module, containing sample financial data for a hypothetical small business. This data includes details on:
Study the data
- Why could the Selling Price assumption change?
- Why could the Variable Costs assumption change?
- Why could the Fixed Costs assumption change?
Answer these questions
As an additional task, you might want to examine other small company accounts and carry out a similar exercise to give you further practice examples and experience in conducting this type of analysis.
Additional Task
Fixed Costs (rent, salaries, insurance etc.)
Variable Costs (cost per unit)
Selling Price (per unit)
Simulation
Analysis Task
Analysis: Calculate the Break-Even Point and analyse its implications for the business.
1. Calculate the break-even point:Use spreadsheet software to calculate the Break-Even Point from the relevant provided data in both units and revenue terms.
2. Adjust the selling price, variable costs and fixed costs: 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%
See the formulae used
Simulation
Analysis Task
3. Analyse the influence of adjusting the key variablesConsider various scenarios by adjusting the Selling Price, Variable Costs and Fixed Costs at the same time to observe how changing multiple factors influences the Break-Even Point.
4. Detail what implications these changes have on:
- Selling Price
- Variable Cost
- Fixed Cost
5. Understand the combined impact of adjusting multiple variablesAnswer the following question:What would be the combined impact of adjusting the three elements (Selling Price, Variable Cost, Fixed Cost) on the units to achieve break even?
Simulation
Create Task
Key Findings
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 3 pages.
Recommendations
Create: Develop a financial report summarising the Break-Even Analysis and providing recommendations.
Simulation
DOCUMENT AND PRESENT Task
Presentation
Compile your financial report and prepare a brief 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.
Share and Get Feedback:
Share your presentation with a peer or mentor for feedback.
Document & Present: Create and deliver a presentation of your key findings.
Simulation
Reflection Task
Learning Experience
Application
Skill Development
Reflect on the entire process, from data collection to analysis and presentation.
Consider the challenges faced, the decisions made during scenario analysis, and what could be improved in future analyses.
Think about how this exercise has enhanced your skills as a potential Accountant and how you can further improve.
Reflection: Reflect on the entire process.
Simulation
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.
Expected Outcome
Well done for completing the simulation! In the next section you will upload your research.
Formula used to calculate the Break-Even Point in terms of revenue.
Formula used to calculate the Break-Even Point in terms of units to be sold.
Review the key concepts of Break-Even Analysis, including:
- Fixed Costs
- Variable Costs
- Contribution Margin
- Break-Even Point
- Selling Price