Break-even point refers to the point where income and cost are equal in sales or business activities, that is, the sales volume or business scale without profit or loss. Analyzing the breakeven point can help enterprises determine the minimum sales volume or business scale to ensure no loss.
1. Determine fixed costs: fixed costs are costs that do not change with sales volume or business scale, such as rent, depreciation, fixed wages, etc.
2. Determine variable costs: variable costs are costs that vary with sales volume or business scale, such as raw material costs and direct labor costs.
3. Calculation of contribution gross profit margin: Contribution gross profit margin refers to the proportion of each unit of sales used to cover variable costs and residual fixed costs. The calculation formula is: contribution gross margin = (sales-variable cost)/sales.
4. Calculate the break-even point sales volume: the break-even point sales volume refers to the sales volume in which revenue equals cost. The calculation formula is: breakeven point sales = fixed cost/contribution gross profit margin.
By analyzing the break-even point, enterprises can know the minimum sales volume or business scale to reach the break-even point, and make reasonable sales strategies and business decisions based on this information to ensure the profitability and sustainable development of enterprises.
Measures to reasonably grasp the balance of profit and loss
1. Accurately calculate cost: accurately calculate fixed cost and variable cost to ensure that there is no omission or double calculation. The variable cost should be estimated or calculated according to the actual sales volume or business scale to avoid overestimation or underestimation.
2. Analysis of the influence of sales volume change on profit and loss: By analyzing the influence of sales volume change on breakeven point, we can know the minimum sales volume to reach breakeven point. At the same time, we can also analyze the influence of the increase or decrease of sales volume on profitability to decide whether it is necessary to increase sales volume or adjust business scale.
3. Managing fixed costs: Fixed costs are inevitable, but the impact on breakeven can be reduced through reasonable management. For example, we can find ways to reduce fixed costs, such as reducing rents, reducing personnel costs or optimizing equipment utilization.