How can I analyze profit?

Execution of profit analysis requires separation of cost types, calculating the margin of the contribution and determining the breakpoint. The fixed department from variable costs helps businesses to assess which costs remain the same or fluctuate if there are changes in production. The contribution range is used in profit analysis to see how much profit is on the product without weighing fixed costs. Knowledge of his breaking point can help the company understand when his income will exceed the costs. Point post and Breakeven Point can then be used as a scale for other companies. Fixed costs do not change when the production level, such as overhead costs, salaries in management and indirect fluctuations of work. Variable costs are costs that increase with sales or production increases. Examples of variable costs include raw materials, direct work and storage. These numbers will be a profit analysis when using the contribution margin, contributions can be made to calculate profits.

. The span of the posts is calculated by the fact that cElk's number of sales deducts for a predetermined period of time and then deducts its variable costs over the same period of time. If there are multiple products, this should be done for each product separately. Comparing the contribution of each product may be useful in finding out which products contribute more to the sale of the company's net operating income.

Breakeven point for product is the number of items that must be sold to make profits. The turning point is calculated by distributing the span of the contribution for the selling price for the unit to come up with the ratio of the margin of the contribution. Furthermore, the overall fixed costs are divided by the thPometer of the margin of the contribution to obtain a breakpoint. For example, if the margin is $ 10 in the US dollars (USD), the selling price per unit is $ 25 and the total fixed cost is $ 50,000, then the break point will be 125,000 items. Business in this example would have to sell at least 125,001 items to bepossible to see profit.

Collecting the results of the contribution and the analysis point is the final step of profit analysis. The results can be compared to the results of other products as well as the results of competitors to see if the enterprise uses its variable and fixed costs effectively. Business can determine whether certain costs can be reduced by reviewing the list of variable and fixed costs, and then recalculating its contributory margins and turning points to see how changes can affect its profit. Companies should be cautious about cost reduction, especially if the costs are not significantly affected by the Breakeven point, but affects the quality.