Join Jim Stice for an in-depth discussion in this video When variable costs become fixed costs, part of Running a Profitable Business: Calculating Breakeven.
- [Voiceover] General Motors is doing quite well these days.…Net income for 2014: Four billion dollars.…But it wasn't always so.…For example, for the year 2008, General Motors…actually lost 30 billion dollars.…This was the year before GM declared bankruptcy…and then restructured its operations and its financing.…- So let's talk about one of the factors that caused GM…to lose so much money before its bankruptcy.…Clear back in 1984 the big three US auto makers,…Ford, General Motors and Chrysler agreed with…the United Auto Workers, the UAW union,…to create a Jobs Bank for UAW union workers to be placed in…if they were not needed for automobile production.…
During their time in the jobs bank, workers would receive…between 85% and 95% of their full pay…and would continue to enjoy full medical benefits.…Here's a description of Jobs Bank activities from…a New York Times Article: "Each day, workers report for duty…"at the plant and pass their time reading,…"watching television, playing dominoes or chatting.…"Since GM shut down production there last month,…
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- Breaking down fixed and variable costs
- Pricing a service to cover costs
- Identifying high contribution margins
- Calculating a company's breakeven point
- Conducting breakeven analysis with breakeven equations
- Computing target net income
- Exploring sensitivity analysis