How to perform a break-even analysis?
Posted: Sun Dec 22, 2024 9:34 am
Break-even analysis is based on a breakdown of the total costs incurred by the company into fixed costs that do not fluctuate with fluctuations in production volumes, and variable costs that depend vietnam girls whatsapp number on their volume.
To determine the break-even point, certain simplifying assumptions must be made in the calculations relating to price and costs:
Production in a given period is equal to sales
Total costs depend linearly on production volume - variable costs are proportionally variable and fixed costs are absolutely fixed
The sales price is set so that sales revenue is proportional to sales volume.
We can determine the break-even point in two ways: analytically or graphically.
The analytical method consists of calculating the break-even point using the determining factors of product price, unit variable cost and fixed costs. To determine the break-even point, the sales level is sought at which sales revenue equals the total costs incurred by the company.
There are two types of break-even point - quantitative, which sets the production volume at which the financial result is zero, and valuable , which shows the minimum sales value that must be reached in order not to incur losses. Percentages are also useful for analysis , which determine what part of the forecast demand should be used.
The graphical method consists of placing the relevant data in a coordinate system, which allows the break-even point to be read, located at the intersection of the production value curve and the total cost curve. The graph also makes it easier to read whether the company is in the profit or loss zone.
Advantages of an income statement
With the results, you will be able to develop the right financial and growth strategy for your company: it will be easier for you to determine the right directions to take in order to make more profits. Profitability analysis It will also allow you to answer questions about the profitability of your investments and identify the possible loan repayment periods. Above all, it will allow you to estimate the value of your business.
To determine the break-even point, certain simplifying assumptions must be made in the calculations relating to price and costs:
Production in a given period is equal to sales
Total costs depend linearly on production volume - variable costs are proportionally variable and fixed costs are absolutely fixed
The sales price is set so that sales revenue is proportional to sales volume.
We can determine the break-even point in two ways: analytically or graphically.
The analytical method consists of calculating the break-even point using the determining factors of product price, unit variable cost and fixed costs. To determine the break-even point, the sales level is sought at which sales revenue equals the total costs incurred by the company.
There are two types of break-even point - quantitative, which sets the production volume at which the financial result is zero, and valuable , which shows the minimum sales value that must be reached in order not to incur losses. Percentages are also useful for analysis , which determine what part of the forecast demand should be used.
The graphical method consists of placing the relevant data in a coordinate system, which allows the break-even point to be read, located at the intersection of the production value curve and the total cost curve. The graph also makes it easier to read whether the company is in the profit or loss zone.
Advantages of an income statement
With the results, you will be able to develop the right financial and growth strategy for your company: it will be easier for you to determine the right directions to take in order to make more profits. Profitability analysis It will also allow you to answer questions about the profitability of your investments and identify the possible loan repayment periods. Above all, it will allow you to estimate the value of your business.