# Breakeven analysis important to fixed fee or per

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Breakeven analysis important to Fixed Fee or Per Capita Performer? First we must calculate the total variable and fixed costs and derive the contribution income statement. The fixed and variable costs for individual categories were calculated in previous steps so all that is needed now is to add the mall up. That is done in parts 5 and 6 of the appendix. In the case with a guaranteed talent fee, in part 7 of the appendix, we see that over 90% of the costs are fixed. This means that the breakeven point will be higher than if the talent cost would be based on a per
capita basis. We can test this by moving the \$160,635 talent cost to the VC. In this case we see that fixed costs make up only 35.25% of total cost and therefore the breakeven point will be much lower than in the previous example. Another way to determine the importance of the breakeven point analysis is to calculate the Degree of Operating Leverage. This is done in part 7. As we can see, the DOL for the higher fixed cost is 4.93. This means that for each 1% of change in sales, the operating profit would change by 4.93%. In the other case, the DOL is 2.53. This change applies to lost sales as well and in the high fixed cost case, we would lose 4.93% in profit, for each 1% of lost sales so we would reach the breakeven point much quicker. Sensitivity Analysis understanding uncertainty of events There are several ways to perform a sensitivity analysis. The most common way is a “what-if” analysis. In the case of ALLTEL, 2 scenarios were chosen. The first scenario (part 8, section a), shows how the
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