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Go-Nuts Case Study

The document presents a case study and analysis for Go-Nuts, a new energy drink product by Global Food, Inc. It analyzes the product's break-even point and degree of leverage using two methods: [1] Break-even analysis to determine the sales volume needed to cover total fixed costs. [2] Degree of operating leverage analysis to measure how operating income will change with variations in sales from the base estimates. The analysis aims to provide the company with sensitivity estimates to inform their profit planning for Go-Nuts.

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Herdi Sularko
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136 views

Go-Nuts Case Study

The document presents a case study and analysis for Go-Nuts, a new energy drink product by Global Food, Inc. It analyzes the product's break-even point and degree of leverage using two methods: [1] Break-even analysis to determine the sales volume needed to cover total fixed costs. [2] Degree of operating leverage analysis to measure how operating income will change with variations in sales from the base estimates. The analysis aims to provide the company with sensitivity estimates to inform their profit planning for Go-Nuts.

Uploaded by

Herdi Sularko
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Case Study “Go-Nuts”

Break-Even and Degree of Leverage Analysis

Prepared by:
Anissa Dinar P - 29318427
Ario Wibisono - 29318454
Herdi Sularko - 29318326
Klemen Pratama - 29318430
Daniel Sibarani - 29318452
The Situation

Brief Context Analysis Method

● Go Nuts is a new ● Obtain some good estimates Break-Even Analysis, a.k.a.


for the “what-if” cases,
energy drink product by estimates sufficiently reliable “Worst-case scenario” in this
Global Food, Inc. to show the controller. case
● The estimates would be 2
● During the Corporate points:
Planning Cycle the ○ Perform sensitivity Degree of Operating
analysis to calculate Leverage (DOL) Analysis,
company is elaborating
profit result (in this
the Profit Plan of “Go case 10 percent lower a.k.a. “Sensitivity Analysis” in
Nuts” as one of its or 10 percent higher) this case.
○ Worst case scenario -
newest product line which is to know how
much quantity sales
to reach zero profit.
Break Even Analysis

The Break Even Analysis (BEA) is a tool to


analyze the correlation between fixed costs and
variable costs and revenue.
5
It’s inseparably associated to the Break Even
Point (BEP), which indicates at what moment an
investment will start making a positive return.

A Break-Even Analysis calculates the size of the


production at a certain price that is important to
cover all the costs that have been incurred.

Break even quantity = 1000

Fixed costs /
(Sales price per unit – Variable cost per unit)

Q = TFC / (P - AVC)
Degree of Leverage (DOL) Analysis

Degree of operating leverage (DOL) is a type of


elasticity formula.

It is a multiple that measures how much the


operating income of a company will change in
response to a change in sales.

Companies with a large proportion of fixed


costs to variable costs have higher levels of
operating leverage.

https://www.investopedia.com/terms/d/degreeofoperatingleverage.asp
Excel Formula

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