Break-even Graph: Bo-FIND Profit Margin
In our project, we aimed to develop financial models, including a break-even analysis that illustrates the number of BRD testing kits we need to sell to achieve profitability. We established a selling price of $117 for each kit, which includes the necessary materials to test one cattle. This price point was derived from the following cost breakdown: $15 for wet lab materials, $58 for the Arduino kit, $17 for chitosan, the material used to encase our heating device, and $0.023 for centrifuge tubes. We applied a 30% markup to these costs to ensure a profit margin. Additionally, we accounted for fixed costs amounting to $1,500 to cover labor and other expenses related to production. Furthermore, we designated a variable cost of $100 per product to accommodate unforeseen expenses such as shipping and packaging.
Components |
Cost (CAN) |
Wet lab materials |
$15 |
Arduino kit |
$58 |
Chitosan plastic |
$17 |
Centrifuge tubes |
$0.023 |
Subtotal |
$90.023 |
30% markup |
$26.977 |
Total Selling Price |
$117 |
The resulting graph indicates that we must sell 88 units before we begin to realize profits. This figure is particularly significant as we believe there is a strong niche market for our product, with potential customers who would be willing to make a purchase. The insights gleaned from this analysis provide us with a clear understanding of the financial landscape we may encounter while marketing our BRD testing kits.
Figure 3. A Predictive break-even model if we were to sell our product at $117 (CAD) with a $1500 fixed cost. Break-even in profit margins occurs at 88 units sold. Before this point, there is no profit; after the break-even point, we begin to yield.
Figure 4. A predictive model showing a $3 (CAD) decrease per 2 units of Bo-Find sold if 36 devices are sold at $117 each.
In this equation, the number 88 represents the initial product quantity sold, while 117 stands for the initial cost per unit. The relationship described suggests that for every $3 decrease in the price, an additional two units of the product are sold. This reflects a common economic principle where lowering the price leads to increased sales. The quadratic equation (88+2x)(117−3x) models this relationship, where x represents the number of changes. Four price decreases will yield maximum profits while still staying above production costs and allowing us to make a profit. This model is important in determining the most optimal price for our product which in theory should be 102 dollars which is achievable if our product can get past the break-even of 88 units and start making a profit.
The graph of this equation shows how sales and revenue are affected by price adjustments. Initially, sales increase as the price decreases, but due to the parabolic shape of the graph, there is a point where lowering the price further begins to negatively impact overall revenue. This happens because our sale price then drops below 60 dollars and we lose money selling while there is more demand for the product.