Break Even Training Simulation

7/30/2019 Break Even Training Simulation

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production and marketing

0%

Pricing

x Vol +

Fixed Variable

Physical Plant --

Marketing Dollars --

Direct Labor --

Raw Materials --

Machinery Capital --

Tool Capital --

Outsourced Parts --

--

--

Physical Plant

cost classification

break-even formula

Break E

Product

Variabl

Fixed C

Projected Demand

Manufacturing Automation

x Vol =

Break Even Analysis

--

0%

Break E

CFO

Total Fixed Cost

Total Variable Cost

Marketing Manufacturing

TANRO

Outsourcing Dependence

Marketing Investment

key perf

powered

by:

Glossary

break-even graph

Years t

0

0

0

0

0

0

0

0

0

0

0

0 0 0 0 0

USDollars(Millions)

Unit Vol
http://www.knowledgedynamics.com/demos/breakeven/Glossary.htmhttp://www.knowledgedynamics.com/demos/breakeven/Glossary.htmhttp://www.knowledgedynamics.com/demos/Breakeven/index.htm


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--

--

--

--

--

--

ven Volume

ion Capacity/yr

Cost

ost

ven Revenue

rmance indicators

ExitHelp

Break Even

0 0 0 0 0 0

lume (Thousands)

Fixed Cost

Variable Cost

Total Cost

Revenue

BE Volume


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production and marketing

Production Decisions

break-even formula

Break Even Formula

cost classification

Cost Classification

feedback

CFO

Marketing

Manufacturing

At this time, I can't give you any feedback because I don't know howmuch our projected demand is going to be. Please complete themarketing decisions, then come back to me for feedback.

I'd like you to start by deriving the Break Even formula. Please completethe formula before asking me for feedback again.

I can't give you any feedback right now because you haven't made any

marketing decisions. Please determine how much you want to spend on

advertising and how much you want to sell the mower for, then comeback to me for feedback.

Correct

Select Input Sources and Test Data

Price < Variable Cost

Correct


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key performance indicators production and marketing-

Inputs

Projected Demand Physical Plant

Outsourcing DependenceFixed Cost Manufacturing Automation

Variable Cost Marketing Investment

Production Capacity/Yr Pricing

Break Even Volume

Break Even Revenue beak-even formula-Related

Years to Break Even Inputs

Position 1

Position 2break even graph Position 3

cost classification-RelatedInputs

Physical PlantMarketing DollarsDirect LaborRaw Materials

Machinery CapitalTool CapitalOutsourced Parts

--

--

--

--

--

--

Outcomes Resulting from the Test Data Selected

--

0

0.0000001

0.0000002

0.0000003

0.0000004

0.0000005

0.0000006

0.0000007

0.0000008

0.0000009

0.000001

0 0.001 0.002 0.003 0.004 0.005 0.006

USDollars(Millions)

Unit Volume (Thousands)


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elated User Decisions Test data sets

Value to Use Input Value Custom Acceptable Demand > Capacity

Lease FALSE Buy Lease Lease

20% 20 22% 59% 20%20% 20 35% 17% 20%

500,000$ 500,000$ 800,000$ 650,000$

295$ 500$ 460$ 400$

User Decisions Test data sets

Value to Use Custom Correct Interesting Mistake

Price Labor Cost Price Price

Variable Cost Fixed Cost Variable Cost Variable CostFixed Cost Machinery Cost Fixed Cost Machinery Cost

User Decisions Test data setsValue to Use Input Value Custom Correct Several Errors

Fixed TRUE Fixed Fixed FixedFixed TRUE Variable Fixed VariableVariable FALSE Variable Variable FixedVariable FALSE Variable Variable Fixed

Fixed TRUE Variable Fixed VariableFixed TRUE Variable Fixed VariableVariable FALSE Fixed Variable Variable

Input Sources and Test Data.


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Option Buttons Option Bu

BE Volume > Capacity Price < Variable Cost Physical PValue Cost Clas

Buy Lease Buy TRUE Fixed

8% 20% Lease FALSE --None Sel8% 20% --None Sel #N/A Variable

500,000$ 500,000$

550$ 295$

Text 4

Variable Cost

Outsourced Parts CostFixed Cost

Test 4


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tons

Value

TRUE

#N/AFALSE


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User Interface/Test Configuration Input Toggle

Use Inputs from: User Interface


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whether the model should use Inputs from the User Interface (B6:E38) or(Make sure that this value is User Interface before making a web application)

Test Inputs ==>> Inputs for Model

...Inputs from the Test Sheet Controled by D3, these are thethe Calculations and result in t

from the Test Sheet ==>> The Production and Marketingfed into the Simulation Model

Production and Marketing Decisions Production and Marketing Decisions

Input Value (buy) Input Value (buy)

Buy/Lease Physical Plant FALSE ==>> Buy/Lease P #N/A

Outsourcing Dependence 20 Outsourcing 0

Manufacturing Automation 20 Manufacturi 0

Marketing Investment 500,000$ Marketing In 0

Pricing 295$ ==>> Pricing 0

from the Test Sheet The Break Even Formula Decis

to be fed into the Simulation M

Break Even Formula ==>> Break Even Formula

Input Value Input Value

Position 1 Price Position 1 0

Position 2 Variable Cost Position 2 0

Position 3 Fixed Cost ==>> Position 3 0

from the Test Sheet The Cost Classification Decisithe Simulation Model

Cost Classification ==>> Cost Classification

Input Value (fixed) Input Value (fixed)

Physical Plant TRUE Physical Pla #N/A

Marketing Dollars TRUE Marketing D #N/A

Direct Labor FALSE ==>> Direct Labor #N/A

Raw Materials FALSE Raw Materia #N/A

Machinery Capital TRUE Machinery C #N/A

Tool Capital TRUE Tool Capital #N/A

Outsourced Parts FALSE ==>> Outsourced #N/A


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Intermediate Calculations

These calculations are the heart of the Simulation moultimately the Outputs (just to the right)

Calculate the Projected Demand by using an InterpolaProjected Demand = Function(Price, Marketing Investment)

inputs fed into Projected Demand Matrixhe Outputs Marketing Investment

1 2

Decisions to be Price 1 4000001 100 210,000 525,000

2 300 52,500 131,250

Display Value 3 400 38,587 105,000

--None Selected-- 4 430 26,250 52,500

0% 5 500 13,124 26,250

0% 6 750 2,500 4,600

7 3,000 1 1

8 3,001 0 0

Normalized Actual Price

ions

odel Break down the Cost Classification cost amount

based on whether the user has chosen them to be

Fixed or Variable. User Mistakes will flow throughthe Model.

Cost Classification

Classification Value Association

Variable Fixed Cost

ns to be fed into Physical Plant -$ -$ -$Marketing Dollars -$ -$ -$

Direct Labor -$ -$ 100$

Display Value Raw Materials -$ -$ 260.00$

--None Selected-- Machinery Capital -$ -$ 24,000,000$

--None Selected-- Tool Capital -$ -$ 2,100,000$

--None Selected-- Outsourced Parts -$ -$ -$

--None Selected--

--None Selected-- Calculate the Direct Labor Cost by using an Interpolati

--None Selected-- Direct Labor = Function(Automation, Outsourcing)

--None Selected-- Direct Labor Matrix

Automation

1 2

Outsourcing 0 20


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1 0 100 87

2 20 85 64

3 50 50 42

4 80 28 21

5 100 0 0

Normalized Actual Value

Calculate the Raw Materials Cost across a Vector of v

Raw Materials = Function(Outsourcing)

Raw Materials Vector

Outsourcing Cost

1 0 260

2 20 220

3 50 140

4 80 75

5 100 32


Calculate the Machinery Cost by using an Interpolatio

Machinery Capital = Function(Automation, Outsourcing)

Machinery Capital Matrix

Automation

1 2

Outsourcing 0 20

1 0 24,000,000 31,000,000

2 20 18,000,000 23,000,000

3 50 12,000,000 17,000,000

4 80 6,000,000 8,000,000

5 100 2,000,000 2,000,000


Calculate the Machinery Cost by using an Interpolatio

Tool Capital = Function(Automation, Outsourcing)

Tool Capital Matrix

Automation

1 2

Outsourcing 0 20

1 0 2,100,000 1,050,000

2 20 1,800,000 950,000

3 50 1,000,000 500,000

4 80 70,000 310,000

5 100 100,000 50,000


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Calculate the Outsourced Parts Cost across a Vector

Outsourced Parts Cost = Function(Outsourcing)

Outsourced Parts Vector

Outsourcing Cost

1 0 0

2 20 67

3 50 200

4 80 265

5 100 364


Calculate the Production Capacity by using an Interpo

Production Capacity = Function(Automation, Outsourcing)

Production Capacity Matrix

Automation

1 2

Outsourcing 0 20

1 0 20,000 110,000

2 20 75,000 250,000

3 50 90,000 400,000

4 80 125,000 500,000

5 100 450,000 1,800,000


Plug in the values to the Break Even Formula based o

Break Even Formula

Production Capacity Matrix

Input Value Cost Value

Position 1 0 #N/A

Position 2 0 #N/A

Position 3 0 #N/A

BE Volume #DIV/0!

BE Revenue #DIV/0!

Years to BE #DIV/0!


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74 57 42 1 0 100

50 41 36 2 20 85

33 27 24 Direct Labor Interpolation Calculations

15 13 11 across Automation axis 100.0%

0 0 0 across Outsourcing axis 100.0%

Direct Labor

lues based on the Outsourcing User Decision.

Raw Materials Interpolation Calculations

Outsourcing

1 2

0 20

260 220

100.0% 0.0%

Raw Materials 260.00$

of a 2-D Plane of values based on the Automation and Outsourcing User Decisions.

Local Machinery Capital Matrix

Automation

3 4 5 Normalized 1

50 80 100 Actual Price Outsourcing 0

50,000,000 64,000,000 ######## 1 0 24,000,000

37,000,000 42,000,000 ######## 2 20 18,000,000

30,000,000 35,000,000 ######## Machinery Capital Interpolation Calculations

13,000,000 20,000,000 ######## across Automation axis 100.0%

2,000,000 2,000,000 2,000,000 across Outsourcing axis 100.0%

Machinery Capital

of a 2-D Plane of values based on the Automation and Outsourcing User Decisions.

Local Tool Capital Matrix

Automation

3 4 5 Normalized 1


700,000 350,000 100,000 1 0 2,100,000

600,000 310,000 85,000 2 20 1,800,000

330,000 220,000 75,000 Tool Capital Interpolation Calculations

210,000 92,000 60,000 across Automation axis 100.0%

50,000 50,000 50,000 across Outsourcing axis 100.0%


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Tool Capital

f values based on the Outsourcing User Decision.

Raw Materials Interpolation Calculations

Outsourcing

1 2

0 20

0 67

100.0% 0.0%

Outsourced Part -$

lation of a 2-D Plane of values based on the Automation and Outsourcing User Decis

Local Production Capacity Matrix

Automation

3 4 5 Normalized 1


200,000 450,000 875,000 1 0 20,000

500,000 800,000 1,250,000 2 20 75,000

1,100,000 1,500,000 1,700,000 Production Capacity Interpolation Calculations

1,450,000 2,000,000 2,200,000 across Automation axis 100.0%

1,800,000 1,800,000 1,800,000 across Outsourcing axis 100.0%

Production Capacity

the User selected variables for the Formula as well as their other Decisions

Cost Value Vector

Input Value Cost Value

Building Lease C -$

Fixed Cost -$

Labor Cost 100$

Machinery Cost ##########

Marketing Invest -$

Outsourced Parts -$

Price -$

Raw Materials Co 260$

Revenue #N/A

Total Cost -$

Variable Cost -$


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Outputs

and Here are the Outputs for the Simulation. Most of them are dseveral are used solely for feedback purposes.

ions.Production and Marketing Decisions

Value Display

estment Projected Demand #N/A --

#N/A

#N/A Cost Classification

#N/A Value Display

#N/A Physical Plant -$ --

Marketing Dollars -$ --

#N/A Direct Labor 100$ --

#N/A Raw Materials 260$ --

#N/A Machinery Capital 24,000,000$ --

Tool Capital 2,100,000$ --

Outsourced Parts -$ --

Key Performance Indicators

rketing Value Display

o an set Fixed Cost -$ --

g 'Too Variable Cost -$ --' Production Capacity/Yr 20,000 --

Break Even Volume #DIV/0! --

Brean Even Revenue #DIV/0! --

Years to Break Even #DIV/0! --

Non-Visual Feedback Outputs

Production and Marketing Decisions

Value

Capacity >= BE Volume #DIV/0!

Demand >= BE Volume #N/A

Capacity > Demand #N/A

Price > Variable Cost FALSE

s.

2

20


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0.0%

0.0%

100.00$

2

20

31,000,000

23,000,000

0.0%

0.0%

24,000,000$

2

20

1,050,000

950,000

0.0%

0.0%


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isplayed in the User Interface for the User, however,

Break Even Graph

Break Even Graph

Volume

0 BEV-.1 BEV bev+.1 BEV*1.5

Graph Lines 0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Fixed Cost 0 0 0 0 0

Variable Cost 0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Total Cost 0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Revenue 0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!

BE Volume 0 0 #DIV/0! 0 0

0

0

0

0

0

1

1

1

1

1

1

0 0 0 0 0 0

USDollars(Millions)

Unit Volume (Thousands)

Break Even Graph

Fixed Cost Variable Cost Total Cost Revenue BE Volume


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Constant Value Lookups

The Values are Looked Up for Reference for use in the IntermediateCalculations and Feedback

Option Buttons Price

Value Physical Plant Cost Classification Value

FALSE Lease Variable 1

TRUE Buy Fixed 200

#N/A --None Selected-- --None Selected-- 350

500

Physical Plant Costs 600

Selection Cost

Buy 30,000,000$ Marketing

Lease 2,000,000$ Value

--None Selected-- -$ 1

300,000

Break Even Formula Drop Down Input Toggle 400,000

Input Value Use Inputs from the #######

Price User Interface #######

Revenue Test

Variable Cost

Raw Materials Cost

Labor Cost

Total Cost

Fixed Cost

Machinery Cost

Building Lease Cost

Outsourced Parts Cost

Marketing Investment


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Analysis

Too Low

Low

Good

High

Too High

Investment

Analysis

Too Low

Low

Good

High

Too High


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Blank If Rule is FALSE

Nothing DoneI'd like you to start by deriving the I'd like you to start by deriving the Break Even form

Incomplete

I can see that you started to derive the Break Even

Three Wrong

It looks like your having some major problems with

Less Than Three WrongYou derived the break even formula incorrectly.

Pos 1 WrongThe correct answer for the first va

Pos 2 CloseFor the second variable, 0 is close

Pos 2 Wrong

The second variable is incorrect.

Pos 3 CloseFor the third variable, 0 is close.

Pos 3 WrongThe third variable is still incorrect.

Nothing Done/IncompleteNow that the Break Even formula Now that the Break Even formula is complete, I'd lik

Reversed Fixed and Variable It seems like you're confused about the meaning of

Some MistakesYou still have the following problems with your cost

Plant IncorrectThe PHYSICAL PLANT is NOT a

Cost Classification Feedback Rules:

BEF Feedback Rules:

Total Feedback:

I'd like you to start by deriving the Break Even formula. Please complete the formula

Label of the Feedback Rule

Feedback text - only used if the Feedback Rule is T


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Marketing IncorrectMARKETING DOLLARS is NOT a

Labor IncorrectDIRECT LABOR is NOT a fixed c

Raw Materials IncorrectRAW MATERIALS is NOT a fixed

Machinery IncorrectMACHINERY CAPITAL is not a va

Tool Capital IncorrectTOOL CAPITAL is NOT a variable

Outsourced Parts IncorrectOUTSOURCED PARTS is not a fi

No Physical Plant DecisionYou haven't decided whether or You haven't decided whether or not we are going to

VC > PriceOur variable costs exceed the price we are chargin

BE > 2 yearsOur break even period is greater than 2 years. If w

Marketing and/or Manufacturing ProblemsI think you better check in with our VP of Marketing

Approval#N/A Your entire analysis is correct and it looks like we wi

Nothing to SayI don't not have any advice to giv I don't not have any advice to give you right now.

I'd like you to start by deriving the Break Even formula. Please complete the formula

Now that the Break Even formula is complete, I'd like you to classify all of the costs. I

You haven't decided whether or not we are going to buy or lease the physical plant.

I don't not have any advice to give you right now.

Financial Consideration Feedback Rules:

Overall Approval Feedback Rules:

BEF Feedback Summary:

Cost Classification Feedback Summary:

Financial Consideration Feedback Summary:

Overall Approval Feedback Summary:


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I'd like you to start by deriving the Break Even formula. Please complete the formulaFeedback Summary:


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la. Please complete the formula before asking me for feedback again.

ormula, but I'd like you to finish it before I give you feedback.

he break even formula. All of your answers are incorrect. Obviously, if you can't derive the formula cor

iable is not 0. On the left side of the equation you should be trying to compute revenues. Revenue = _

, but it is not the best choice. Select the variable that includes ALL volume-dependent costs, not just on

his variable represents of the costs that are volume-dependent.

ou are correct that this variable should not be volume dependent, but you should select the variable tha

This variable represents the costs that are not volume-dependent.

e you to classify all of the costs. It is very important that this is done correctly. If it is not, the analysis w

fixed and variable costs. You've classified all of the variable costs as fixed, and all of the fixed costs as

lassification:

ariable cost. This is considered a fixed cost because it is not dependent on the volume of production.

before asking me for feedback again.

RUE.


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before asking me for feedback again.


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nse for me to look at the results until you've made a decision.

eak even date - it can't even be calculated!Try to find a combination of production and marketing decisions

nd marketing decisions to see if we can reduce the break even period.

til you've made a decision.


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amiliar with this concept.

upon production volume. Refer to the Reference System if you still do not understand the difference.


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that allow us to break even within two years. If this combination does not exist, the board will not appro


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e the venture.


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Thank You for the Feedback

I can't give you any feedback right now because you haven'tmade any marketing decisions. Please determine how

much you want to spend on advertising and how much youwant to sell the mower for, then come back to me forfeedback.


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Nothing DoneI can't give I can't give you any feedback right now because you haven't made any marketing decisions.

Approval

Everything looks good from a marketing perspective. I think we are going to sell a lot of law

Marketing InvestmentYou still ha blank placeholder

Incomplete

You still ha You still haven't determined how much you want to spend on advertising. Pleas

Too LowI don't think your marketing investment is sufficient. If we do not generate enou

Too HighI normally don't tell people that they are investing too much in marketing, but I thi

ApprovalThe marketing investment looks good. I think this is enough to generate sufficie

Pricing

I'd like to k blank placeholder

IncompleteI'd like to k I'd like to know how much you are going to charge for the lawn mower. This will

Too LowI think you are being too conservative with your pricing. I think you can get away

Too HighYour pricing is too aggressive. I don't think we'll be able to attract mid-range cus

ApprovalI'm comfortable with your pricing. I think we will maximize our revenues at or ne

I can't give you any feedback right now because you haven't made any marketing decisions. Please deFeedback Summary:

Total Feedback:

I can't give you any feedback right now because you haven't made any marketing decisions. Please de

Marketing Feedback Rules:


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At this time, I can't give you any feedback because I don'tknow how much our projected demand is going to be.Please complete the marketing decisions, then come backto me for feedback.

Thank You for the Feedback


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No FeedbackAt this timeAt this time, I can't give you any feedback because I don't know how much our projected de

No Physical Plant Decision

Even though you haven't decided whether or not you're going to buy or lease the physical pl

Capacity < DemandCurrently, it looks like we will not have enough manufacturing capacity to meet our projected

VC > PriceI noticed that the variable cost of building the lawn mower exceeds the price we are chargin

ApprovalIt looks like we have more than enough capacity to meet demand. I'm comfortable with you

At this time, I can't give you any feedback because I don't know how much our projected demand is goi

Total Feedback:

At this time, I can't give you any feedback because I don't know how much our projected demand is goi

Marketing Feedback Rules:

Feedback Summary:


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physical plant.

fitable.You can increase our capacity by increasing the levels of automation and/or outsourcing, but the

lower the variable cost, such as reducing automation or outsourcing, or increasing the price.


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e are also going to increase the fixed and variable costs of the lawn mower.You can also try raising the


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price. This might reduce demand while increasing the profit per unit.


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This switching ability is set up using Excel's standard features. In the "Input Sources and Test Data" seconceptual groups, Break Even Formula, Cost Classification, and Production Decisions, running down tEach has an arbitrary number of sets of test data running across the cells to the right.

On the Config worksheet, the section marked "Select Input Sources and Test Data" in green allows thepick test data from a number of different 'Input Sources'. Here we see that the Break Even Formula datUser Interface (this is confusing without knowledge of where you are heading), the Cost Classification dtest data set that is known to be Correct, and the Production Decision data will come from a test set kn

Implementation

This method is implemented here on the Config worksheet. The Learner Inputs are broken into three inalong subject matter lines. These are: Break Even Formula, Cost Classification, and Production Decisio

there are several sets of test data that can be selected independently of the other 2 groups.

etc.

.


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Another useful technique is to aggregate the outputs near the inputs. Now you can quickly switch 'Input

what happens to the Output Variables, the Break Even Graph, and the Feedback from the agents.

An arbitrary number of 'Input Sources' can be created. In the case of the Break Even Formula, there ar

The first 'Input Source' listed below is 'UserInterface'. This will get the values entered in the User Interfacorresponding worksheet. The second 'Input Source' is 'Manual Ad-Hoc' (find better name, perhaps jusplace where you can just try values to see what happens to the model. Following the 'Manual Ad-Hoc' a'Input Sources' that you may want to be able to quickly re-test to see the how the model behaves. HereSource' that has all the 'Correct' selection, and another with an 'Interesting Mistake'. As we build the moretry any of these 'Input Sources'.

For example, in the 'Break Even Formula', the learner must fill out the three parts of the BEF, namelywhich correspond to the 'Input Variables' below. The 'Value To Use' is the value that will flow into theUse' is determined by the which 'Input Source' the designer selected at the top of the page. You can chthe 'Values To Use' to see that the OFFSET and MATCH functions get the appropriate data value for e


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go to Config sheet now.

Of course, prior to publishing the simulation to end users, all of the 'Input Source' selections should beas seen below.


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t to test manyne method for testingor a few tests,tent, error prone, and

t is helpful to be ablegy that enables yourategy further below.

yer, and an outputs input data values

into the model makes

l. So to summarizes are either in the

ctly on the input layer,

test data sets, as is


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tion we see the threehe cells on the left.

simulation designer towill come from the

ata will come from awn to cause market

ependent groupsns. Within each group


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Sources' and watch

5 'Input Sources'.

ce on the'Manual'). This is are a number of otherwe see an 'Inputdel, we can quickly

ositions 1, 2, and 3,odel. The 'Value Tock the formulas ofch 'Input Variable'.


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et to 'UserInterface'

Break Even Training Simulation

Documents

Transcript of Break Even Training Simulation