Every business has fixed and variable costs. The break-even point is the point at which there is no profit, but fixed costs are recouped by the profit from the sale. In this case, people receive salaries, all bills are paid and the business is running successfully, although the owner has no profit yet.
Instructions
Step 1
Determine your fixed costs. These costs are independent of sales volumes. These can be rental costs, permanent employee salaries that are not tied to sales volumes, and other similar costs. List all fixed costs and add them up. Let's say fixed costs are 200 thousand rubles per month.
Step 2
Define variable costs. These are costs that change with sales. For example, the cost of raw materials. The more a product is sold, the greater these costs. Now we are interested in the cost per unit of production. Let's say the cost of purchasing raw materials is 1, 3 rubles per item. Packing costs are 0, 4 rubles per piece. And the cost of salaries to sales agents is 1, 8 rubles for each unit sold. Then the variable costs are equal to 1, 3 + 0, 4 + 1, 8 = 3.5 rubles apiece.
Step 3
Subtract variable costs from the selling price of the product. Let your product be released from the warehouse at a price of 5 rubles per item. Then the difference will be 5 - 3.5 = 1.5 rubles apiece. The resulting value is called the contribution of a unit of output to cost compensation.
Step 4
Divide the result of the 1st step by the result of the 3rd step. As a result, we have 200000/1, 5 = 133333, 33. The volume of sales required to reach the break-even point is found. Now the sales volume is expressed in units of goods. If you sell a product in units, then to break even you need to sell 133,333 units per month. If you sell a product in kilograms, then to reach the break-even point, you need to sell 133333, 33 kg per month. The calculation turned out in a month, because we also took fixed costs for a month.
Step 5
Determine the amount of sales required to break even in monetary terms. To do this, multiply the result of step 4 by the selling price of the product. At the 2nd step, it was indicated that the goods were sold from the warehouse at a price of 5 rubles per item. Accordingly, 5 * 133333, 33 = 666666, 65 rubles. It is for this amount that the goods must be sold in a month in order to achieve breakeven.
