|
The breakeven analysis calculator allows you to examine
some of the critical profit drivers of your business
including- sales volume, average cost of production
and the average sales price.
|
|
The calculation indicates the average number of units your
business has to sell to cover set up costs
(in a start up business), to cover fixed costs in an established
business, or to achieve a desired profit level.
|
|
For information on using this calculator see below.
|
|
|
|
Fill in the required values based on the following information:
|
-
Leave
profit
at zero for breakeven or
input a desired profit amount in whole dollars.
-
The
start up or fixed costs
of your business are the costs that are payable even if your
business did not sell anything
(for example rent, rates and finance costs). Input in whole dollars.
-
The
average variable cost
is the cost
of producing each "unit" sold by your business
(such as variable labour, production or raw material costs).
This could be $2 per kilogram of wool or $5 per haircut.
-
Alternatively leave the default zero in the
average variable cost
box and put all the business' costs in the
Input startup or fixed costs
area. This will result in all costs being treated as fixed
with a Gross Profit Margin of 100%. This is the case for
many industries with zero or few variable costs.
-
The
average unit sales price
is the average price per "unit" sold by your
business. This could be $3.70 per kilogram of wool or $20
per haircut. It must be greater than the
average variable cost
of production.
|
|
If you leave the
profit
input area at zero, the calculator will give an indication of how
many units your business will need to sell to breakeven.
|
|
Breakeven calculation can be particularly useful if
you are considering expanding your business by putting on
extra staff or increasing production. Adding the cost of
this into the
start up or fixed costs
input area will indicate the volume of
sales that could be required to meet the cost of expansion.
If you are looking at expanding, it is also worth considering
how much extra working capital you will require particularly
if your business offers sales on terms.
|
|
You can use the calculator to explore the effects of
various changes to your business such as reducing fixed costs
or increasing the average sale price per unit sold.
Breakeven calculation can also be used over different
time periods. To use the haircut example, you could work out
the weekly fixed costs and the number
of haircuts per week required to break even.
This is useful in planning short-term sales targets
for your business and staff.
|
|
By experimenting with different input values, you
can use the calculator to indicate the effect of a rise
or fall in the cost of production or the sales price.
These factors along with sales volume combine to
form some of the key drivers of business profitability.
|
|
|
top