How do I calculate the turning point?
To learn how to calculate the turning point is very important for anyone who wants to run a successful business, or even make sure that a particular project does not cause any type of loss. The basic definition of a breakpoint is the exact position in which the costs associated with the activities equal to the generated income or income. In order to properly calculate the breakpoint, it is important to have a fixed understanding of the total expenditure associated with this process and relate to the income created from the sale of any goods or services caused by business efforts. Usually, any commercial enterprise encounters two different types of expenditure or costs known as fixed and variable. Fixed costs are constant and have not changed over time, such as a monthly mortgage repayment for companies. The cost of this does not change, even if the production of units increases. On the other hand, variable costs may include tools consumed within the production process, while the rate of consumption changes when moving the unit production.
Once identified and taken into account all costs or costs for a specific period, it is possible to determine the costs for each unit produced within this time frame. This basically included the division of the number of units created by total costs. The resulting value is the amount for which each unit must be sold so that the company can completely get back its expenditure or breakpoint. By determining the retail price above this point, even if it is still competitive on the market, the company is likely to sell enough units to compensate for costs and allow businesses to enjoy at least a small amount of profit.
Portinoids may vary from one production period to another, that is, businesses must take into account this shift every time they try to calculate the break point for the accounting period. For example, shifts of raw materials or usefulness consumption will vary depending on the number of oneOnek produced during one period compared to another. This means that the breakpoint may be higher or lower than the previous period, depending on how increasing the cost results in multiple units. If the company wants to continue to generate revenue over this point, it is necessary to decide on the calculation of the breakpoint for each accounting period.
It is important to realize that the information used to calculate the breakpoint must be as accurate as possible. In some cases, businesses may culminate certain expenditures or use averages to reach a viable calculation response. Although it is acceptable, it should pay attention to the rounding of the characters. If you do not do so, this may lead to an identification of a point that does not actually pose a perfect balance between costs and income, and can actually provide false data that causes the company to underestimate expenditures and work in low loss.