Instruction

1

To determine the threshold of profitability is possible in two ways: analytical and graphical.

The analytical method of calculation of this indicator should follow the following formulas:

The profitability threshold = Spost/Cal shaft.margin

Where Spot – constant expenses,

Cal shaft. Margin – the gross margin.

Shaft. Margin = – Spar,

Where is revenue,

Sper – variable costs.

Cal shaft.margin = Val.margin/V.

The analytical method of calculation of this indicator should follow the following formulas:

The profitability threshold = Spost/Cal shaft.margin

Where Spot – constant expenses,

Cal shaft. Margin – the gross margin.

Shaft. Margin = – Spar,

Where is revenue,

Sper – variable costs.

Cal shaft.margin = Val.margin/V.

2

Of these formulas you can get one complete for finding the threshold of profitability:

The profitability threshold = Spot*In/(- Sper).

The profitability threshold = Spot*In/(- Sper).

3

Using this graph, the threshold of profitability find. On the OY axis tick fixed costs. Draw a line of constant costs, parallel to the OX axis.

4

On the x-axis – the volume of sales. Select any point on the OX axis. For the selected sales calculate the fixed and variable costs. Build direct, satisfying pre-defined value.

5

Again make a note of any point of sales on the x-axis. For this value, find the sum of revenues and also build directly on these values.

6

On the chart the profitability threshold (break even point) will be a point in the intersection of the straight lines constructed pursuant to paragraph 4 and 5 of this manual. Break shows at what value revenue and total cost profit of the enterprise does not have and is equal to zero.

Note

Note that the higher the sales, the fewer fixed costs you have per unit of output, but the amount of variable costs stays the same.

Useful advice

In the case of sales of less than the threshold point, the company incurs losses when sales volume is greater than the threshold point, the enterprise makes a profit.

To calculate the threshold of profitability for individual products or services.

To calculate the threshold of profitability for individual products or services.