What is direct profit?

Direct profit definitions are money derived from the sale, deducted from direct costs. This is one of the best ways to find out whether a specific product is profitable, especially in a company that produces or sells multiple products. However, if they are more products, it is more difficult to determine the direct gain of these products individually.

When only one product produces only one product, it may not be difficult to determine what direct profit is. For example, a company that benefits coal will know what its direct profit is, because everything the company has is reportedly devoted to this operation. Therefore, all the costs that the company exerted in the formula is to determine direct profit. For example, if one line in the food factory produces bread and other snacks, Tslepice exists some costs that will be shared between the two lines. Determination of how it breaks down is the task of the analyst.

to continue thisExample, if the factory buys flour and is generally used by both bread and line production lines, then it is necessary to analyze the use. This determines how much flour is used on the loaf of bread and refreshments. After determining the total number of units created, there is a good indication of how much flour each line uses. Thus, the finding can be taken into account in a direct profit report.

Employee costs for these lines are not so difficult, provided that records are properly kept. Employees can be used exclusively on one or the other line, which further simplifies the process. If this is not the case, it is important to determine how many hours an employee spent on one line against another. With the correct documentation, this is easy to achieve.

However, there are other fixed costs such as building payments, public services and the like that cannot be easily divided. For example, the costs associated with heating or cooling the workspace of employees would be difficult to take into account.One could look at square shots needed for both operations and then divide the costs between them, but it would not be a real reflection of direct profit, because some areas could be heated or cooled more than others. In these situations, the determination of direct profit may be almost impossible.