The concept of breaking even relates to reporting zero operating income. This could be true for...

 

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The concept of breaking even relates to reporting zero operating income. This could be true for the company as a whole or for a specific product or venture. ADJUSTING PRICES TO BREAK EVEN Container ships move more than 95% of the world's manufactured goods. Slowing global trade and oversupply of shipping capacity has put downward pressure on the rates shipping companies can charge. Late last year, the freight rate, which is the price charged, averaged less than $700 per container, but the breakeven price is $1,400. Shipping companies are losing money because the $700 price barely covers the cost of the fuel to run the ship. Because of the carrying capacity of a ship, the company cannot simply add more volume, and it is difficult to cut any costs out of running a ship between two ports, so that leaves price as the mechanism to try to reach profitability. IT'S ALL ABOUT VOLUME The New Zealand-based company, RocketWerkz, released one of the first virtual reality video games. The developers were hopeful that the game would break even, or maybe even turn a profit-it didn't. After spending nearly $650,000 on creating the game, RocketWerkz set a $20 price. It was the volume that ultimately determined whether the product would break even. The company sold enough games to cover only about 60% of the creation costs, meaning RocketWerkz lost money. Read above real life examples. First case explains how price is used to determine the break-even and reach to profitability. Second case tells us volume was not adequate so the company couldn't reach to break-even. 1. Please do some research and try to find similar examples. 2. Find one real-life example where price is the determinant of profitability. 3. Find another real-life example where volume is the determinant of the profitability, in other words the ability to reach to break-even. The concept of breaking even relates to reporting zero operating income. This could be true for the company as a whole or for a specific product or venture. ADJUSTING PRICES TO BREAK EVEN Container ships move more than 95% of the world's manufactured goods. Slowing global trade and oversupply of shipping capacity has put downward pressure on the rates shipping companies can charge. Late last year, the freight rate, which is the price charged, averaged less than $700 per container, but the breakeven price is $1,400. Shipping companies are losing money because the $700 price barely covers the cost of the fuel to run the ship. Because of the carrying capacity of a ship, the company cannot simply add more volume, and it is difficult to cut any costs out of running a ship between two ports, so that leaves price as the mechanism to try to reach profitability. IT'S ALL ABOUT VOLUME The New Zealand-based company, RocketWerkz, released one of the first virtual reality video games. The developers were hopeful that the game would break even, or maybe even turn a profit-it didn't. After spending nearly $650,000 on creating the game, RocketWerkz set a $20 price. It was the volume that ultimately determined whether the product would break even. The company sold enough games to cover only about 60% of the creation costs, meaning RocketWerkz lost money. Read above real life examples. First case explains how price is used to determine the break-even and reach to profitability. Second case tells us volume was not adequate so the company couldn't reach to break-even. 1. Please do some research and try to find similar examples. 2. Find one real-life example where price is the determinant of profitability. 3. Find another real-life example where volume is the determinant of the profitability, in other words the ability to reach to break-even.

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Answer 1 A similar example to the first case would be if a company is selling a product at a loss bu... View the full answer