Break-Even Analysis And Decision Making

Jaden Water Inspection Service tests water quality for industrial applications.

Jaden receives $150 for each inspection and wants to expand its business by adding another employee and vehicle. Jaden anticipates that another employee would add 60 additional inspections per month. Jaden has determined that the average cost for each inspection is $45. The fixed costs for a new employee and vehicle are $3,000 per month.

To persuade his investors that adding another employee is a good idea, Jaden prepared a break-even analysis. (See the “JWIS Break-Even Analysis” document.) Assume the role of Jaden and prepare a report that includes the following (1 to 2 pages):

  • An explanation of the purpose of a break-even analysis as it relates to this case
  • Based on the break-even analysis, an explanation of why the additional employee is a good investment
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