FIGURE 9.4 Example of a breakeven analysis


STORIES FROM THE FIELD: Creating a Coffee Kiosk


A food and nutrition manager was asked to consider adding a coffee kiosk operation in the lobby of the hospital. The manager wanted to know what level of revenue would be required to break even if the kiosk were open Monday through Friday, from 7:00 am to 4:00 pm. Cost of goods sold (food cost) was expected to run at 40% of sales. Minimum staffing required would be 45 hours a week (9 hours × 5 days per week). Average hourly wages would be $15.07 per hour, which included taxes and benefits. If the kiosk is purchased, the depreciation on it will be $100 per week. The breakeven analysis for the coffee kiosk is noted below, the results of which were critical to the decision makers evaluating the project’s viability.


Breakeven analysis for coffee kiosk in lobby Revenue (weekly)


Unknown x


Cost of Goods Sold (food cost) Variable Cost $0.40x Payroll (minimum staffing)


Fixed Cost Depreciation Fixed Cost


$678.15 ($15.07 × 45 hours) $100


Revenue − Fixed Costs − Variable Costs = Net Income 1. x − $678.15 − $100 − $0.40x = 0 2. x − $778.15 −$ 0.40x = 0 3. $0.60x =$ 778.15


4. x = $778.15 $0.60


5. x = $1,296.92


The analysis determined the coffee kiosk would require $1,296.92 in sales per week in order to break even. If the check average (the amount the average customer spends at the kiosk) was estimated to be $4.04, there would need to be 321 transactions per week to break even. Key stakeholders used this information to determine whether this number of transactions (customers) would be a reasonable expectation as part of their decision-making process.


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EFFECTIVE LEADERSHIP & MANAGEMENT IN NUTRITION & DIETETICS


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