Date post: | 29-Nov-2014 |
Category: |
Business |
Upload: | ministry-of-economic-development-businessgovtnz |
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Break-Even Analysis
www.business.govt.nz
Break-even analysis predicts when…
… Your business is going to start making profit.
www.business.govt.nz
- Evaluate a start-up idea- Assess the impact of new
costs- Project profitability for a
new product
It can also be used to:
www.business.govt.nz
Start with your costs…
…By separating them into fixed costs (overheads) and variable costs
You need to know your:TOTAL FIXED COSTSVARIABLE COST PER UNIT
www.business.govt.nz
Dollar break-even equation:
The same as before, just express the contribution margin as a % converted into a decimal figure
62.5% = 0.625
www.business.govt.nz
Hours worked break-even equation
TOTAL FIXED COSTS ÷ HOURLY CHARGE OUT RATE
HOURS TO BREAK EVEN
www.business.govt.nz
Advertising spend break-even equation:
ADVERTISING SPEND ÷ CONTRIBUTION MARGIN
SALES VOLUME REQUIRED FOR AD TO BREAK EVEN
www.business.govt.nz
Weighted average price…
…Is used to find a break-even point by companies selling multiple products or services
www.business.govt.nz
Weighted break-even equation
TOTAL FIXED COSTS÷ (WEIGHTED AVERAGE PRICE – WEIGHTED AVERAGE VARIABLE COSTS)
SALES VOLUME REQUIRED TO BREAK EVEN
Find Out More
Facebook.com/business.govt.nzTwitter.com/business_govtNZLinkedin.com/company/business-govt-nzSlideshare.net/MED-Business business.govt.nz