Operational profit enterprise

Financial management

Operational profit of the company includes the following components:
1) determination of sales, providing break-even operations;
2) use operating liverydzhu a justification for ways to increase profits;
3) conduct operational analysis to assess the impact of various factors on the amount of profit.
When planning operating income is necessary to determine the break-even point, which corresponds to such sales, in which revenues from sales equal to the cost of production and sale of this product. Break-even point can be found by graphical methods.
If the sales below the break-even point, produce a profitable product, loss. Each unit of commodity, sold in the area, located above the break-even point, increases profits.

As we see, as a result of increase in the price level break-even point decreased from 200 to 75 units., Which should be assessed positively. The lower level of break-even point, so it is easier to overcome.
But higher prices could reduce sales and cause damage and, conversely, the lower prices can be achieved profitability by increasing sales.
The reduction of fixed and variable costs will reduce output required to achieve breakeven. But the impact of each of these elements will be determined by the ratio between fixed and variable costs in production costs.
Break-even sales calculations using formula (5.4) are possible for each product separately. If you need to make calculations for the whole company, the break-even sales is determined using the gross margin.