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58 break-even point analysis
refreshment opportunities scheduled between
meeting activity.
CARL PFAFFENBERG, USA
break-even point analysis
Break-even point analysis is concerned with
determining the number of units that must be
sold, or the level of revenues that must be achieved,
to produce a situation where revenues equal
expenses. This analysis can determine the amount
of profit earned at sales levels above break-even
point; the quantification of additional units needed
to be sold to reach profit levels at various points
above the break-even point; the effect of changes in
fixed charges; the effect of changes in variable
costs; and the effect of changes in selling price.
Certain assumptions are required when employing
break-even point analysis. These assumptions
are that fixed costs will remain constant during the
period being analysed; that total variable costs will
fluctuate in a linear fashion with revenues; that
variable costs will remain constant on a per unit
basis; that labour productivity will remain
constant regardless of volume; that revenues will
remain constant on a per unit basis are proportional
to variable costs; that there will be no volume
discounts for bulk purchases; that all mixed costs
will be broken down into their fixed and variable
components; and that the sales mix remains
constant. Furthermore, it is understood that any
costs that are shared between more than one
department will not be eliminated if one of the
departments is closed, but rather will be allocated
among the remaining departments. The basic
formula for break-even point analysis is fixed costs
divided by contribution margin. Contribution
margin is revenue�s) minus variable cost�s). The
result is the number of units required to be sold to
break-even. A variation on this formula is to add a
sum certain to the fixed costs to provide for profit.
Most tourism operations sell multiple products
with different contribution margins for each
product. Therefore, an additional tool, weighted
average contribution margin percentage, is needed
for break-even analysis. Contribution margin
percentage is the item contribution margin divided
by the selling price. Weighted average contribution
margin percentage is total contribution margin
divided by total sales. To get break-even in sales
dollars, fixed costs are divided by the contribution
margin percentage for a single product or the
weighted average contribution margin for multiple
products. Since most products in the tourism
industry have different contribution margins and
percentages, a weighted average contribution
margin percentage is used to arrive at the total
volume of sales in dollars to reach the break-even
point.
Further reading
Coltman, M.M. �1994) Hospitality Management
Accounting, 5th edn, New York: Van Nostrand
Reinhold.
Schmidgall, R. �1997) Hospitality Industry Managerial
Accounting, 4th edn, East Lansing, MI: Educational
Institute of the American Hotel and Motel
Association.
brochure
STEPHEN M. LEBRUTO, USA
A brochure is a form of printed promotional
material which is designed to communicate with
existing or potential visitors. Although there has
been limited research on the nature and role of the
brochure in tourism promotion, it is recognised
that promotional material, including brochures,
have been used throughout history to attract
tourists �see also promotion, place). Today,
brochures are one of the most commonly used
vehicles for destination promotion.
Bochures are generally designed with one of two
basic functions in mind: to provide practical
information which visitors may use in their trip
decision making and planning processes, and/
or to establish an image of the destination as a
viable alternative when planning future trips.
Image brochures may be further described as
`promotional' with a goal of selling a particular
business or attraction or `lure', with the goal of
promoting a destination area. These functions have
generally been established using four distinct