Make a BREAK-EVEN Analysis

Question

Suppose you own and manage a rice-retail store and you are selling at least 5 different kinds of rice. Make a break-even analysis on:

a. at what price should you sell your product to break even?

b. at what price should you sell your product to earn your desired income while remaining competitive

to other stores?

Notes:

The break-even analysis is on monthly basis.

The kinds and prices of rice you're selling at your store is left at your discretion. Just make it sure that

your prices are reasonable.

Research on average monthly buyer on your own town.

Answer 1

Break-Even Analysis for a Rice-Retail Store

Background Data & Assumptions (Philippines)

• Average monthly rice consumption per person: ~10 kg/month.

• Average family consumption: ~39 kg/month (PSA FIES data).

• Retail rice prices (2024–2025): ₱42–₱55/kg depending on type.

• Exchange rate used: ₱56 = USD 1.

• Assumed store buyers: 200 purchases/month at 5 kg each = 1,000 kg/month.

• Monthly fixed costs assumed: ₱25,000.

Rice Types, Wholesale Costs, and Retail Prices

1. Regular Milled Rice – Cost ₱38/kg, Retail ₱45/kg.

2. Well-Milled Rice – Cost ₱42/kg, Retail ₱50/kg.

3. Premium Rice – Cost ₱48/kg, Retail ₱58/kg.

4. Special Premium (e.g., Dinorado) – Cost ₱52/kg, Retail ₱65/kg.

5. Budget Rice – Cost ₱35/kg, Retail ₱42/kg.

Break-Even Calculations

• Total monthly volume: 1,000 kg.

• Weighted average wholesale cost: ₱42/kg.

• Monthly COGS: 1,000 kg × ₱42 = ₱42,000.

• Total monthly cost (fixed + COGS): ₱67,000.

Break-even price = ₱67,000 ÷ 1,000 kg = **₱67/kg**.

In USD = ₱67 ÷ 56 ≈ **$1.20/kg**.

Profit-Target Pricing

To earn ₱15,000/month profit:

• Required revenue: ₱67,000 + ₱15,000 = ₱82,000.

• Required price per kg: ₱82,000 ÷ 1,000 kg = **₱82/kg**.

In USD = ₱82 ÷ 56 ≈ **$1.46/kg**.

Interpretation

• Break-even price (₱67/kg) and profit price (₱82/kg) exceed typical Philippine retail prices.

• This means the business model is not viable at only 1,000 kg/month.

Recommendations

• Increase sales volume to 2,000–4,000 kg/month.

• Lower overhead costs.

• Source cheaper wholesale rice.

• Keep competitive retail pricing between ₱48–₱60/kg depending on variety.