M&M Case Study: Break-Even Analysis

This exercise provides you the opportunity to apply break-even analysis concepts and Excel skills to a case study problem. The activity continues our work with Mars Inc. M&M candies.

Assignment

Your company is a wholesaler of Mars candies, and you are responsible for the M&M product line. Mars has given you some pricing forecast data concerning 2022 product prices and payment terms. You need to determine the break-even points for your facility based on the information detailed below.

Plain M&M Analysis: You have identified the following 2022 price points on cases of Plain M&M candies from five different suppliers (variable costs)

Supplier A: 48-count 1.74 oz bags will have a cost of $15.91 per case

Supplier B: 48-count 1.74 oz bags will have a cost of $14.75 per case

Supplier C: 48-count 1.74 oz bags will have a cost of $15.00 per case

Supplier D: 48-count 1.74 oz bags will have a cost of $14.91 per case

Supplier E: 48-count 1.74 oz bags will have a cost of $15.65 per case

Your additional costs are below:

Fixed costs for your warehouse are $4,500,000 annually

The selling price per case is $32.99

Labor costs (variable cost) for the warehouse are $7.57 per case

Marketing costs (variable cost) for the candy are $3.00 per case

Assignment:

Part #1: You need to analyze the break-even point for each of the listed supplier options (** Hint-You will need to calculate five break-even points).

In the Excel document for this assignment, there are five tabs named “Part #1 Supplier A” through “Part #1 Supplier E”.  Each tab represents one of the five payment options.  Complete the indicated break-even analysis by filling in the indicated columns, cells, and graphs.  Remember, every chart must have a title, axis labels, axis titles, and a legend.

Determine the supplier option that results in the lowest break-even point based on the number of cases and dollars (** Hint it should be the same price point option for both the number of cases and dollars).   Complete the information on the “Conclusions” tab for Part #1.

Part #2: The market has changed. Your VP of sales indicates that the market will support a

$36.00 per case selling price. To accomplish this, however, marketing costs will need to be increased by 35%. You need to analyze the break-even point for the option you selected with the lowest break-even point in Part #1.  Use the “Part #2” tab in the document for your analysis.  Complete the information on the “Conclusion” tab for Part #2.

Part #3 Finally, answer the question on the “Conclusions” tab for Part #3.