Variable costs are typically telephone and advertising expenses. "Variable costs" are costs that change from month to month.Notice how the calculator automatically calculates the cumulative cost total. (Annual premium of $1,200 divided by 12 months.) Therefore, on the "Fixed Costs" tab, enter for a description "office space" and $1,800, "health insurance" $650 and "liability insurance" at $100. Office space rent at $1,800 a month, health insurance for herself at $650 a month, and liability insurance at $1,200 a year. For now, Jill only has three fixed costs. "Fixed costs" are costs that do not vary from period to period.Since her hourly rate is $85, on the "Selling Price" tab, enter $85.00. Jill has one thing to sell - her time.Since Jill wants to know how many hours she needs to bill a month, she will enter all expenses as monthly expenses. How many hours will she have to work each month to break even? Then from time-to-time, you may tweak the numbers and rerun your break-even analysis. The point being is, what the break-even point analysis means depends on how you entered the numbers.Ī benefit of this calculator is you can easily save your work. If you entered the average price per trip and entered all your expenses as expenses per week, for you, the BEP is the number of trips you must make per week. ![]() If you enter your average income per day, then the BEP is the number of days you must drive to break even. If you are an Uber driver and you enter for the selling price per unit the average price per trip, then your BEP is the number of trips you must make. The BEP is the number of units that you must sell for a deal or business to break-even.Ī unit ties back to what you entered for the "selling price per unit." Instead, you should enter the cost of an individual roll and a single hotdog. You should not enter the total cost of a package of rolls and a package of hotdogs. ![]() You buy hotdog rolls in packages of a dozen, and the hotdogs in boxes of forty-eight. Imagine you sell hotdogs, and you want to know how many hot dogs you need to sell to reach your BEP. Make sure to enter the component costs consistently relative to the unit selling price. If your business sells a product, enter the cost of the components that go into making the product. If your company has a twelve-month contract for local newspaper advertising, you might want to consider advertising a fixed cost. Of course, as with fixed costs, one business's variable costs could be another business's fixed cost. Or the business can even eliminate advertising from one period to the next. The amount a business spends on advertising can increase, decrease. Advertising is a classic example of a variable cost. Variable costs are those items that change over time and are not required. For this other firm, accounting services would be a variable cost. If your company has an accountant under a monthly retainer, your analysis should consider the retainer fee as a fixed cost.īut another firm may pay an accountant on an as-needed basis. One business's fixed costs could be another business's variable cost. A business cannot eliminate a fixed cost even if business conditions change. If you have a lease on a building or vehicle, you'll have to make the periodic lease payments regardless of business conditions. Rent is a classic example of a fixed cost. ![]() Fixed Costsįixed costs are those items that do not change over time. On the other hand, you may decide to enter your average income per day, and then your BEP will be the number of days you need to drive. In that case, your BEP is the average number of trips you must make. You can calculate your average price per trip and enter it. Or perhaps you are an Uber driver who wants to know your break-even point. If you need the BEP expressed in the number of days, enter your daily rate. If you sell a service and want the BEP expressed in the number of hours you must bill each month to break-even, you need to enter your hourly rate. The key thing you need to define is what the unit is. Remember, the break-even point is the number of units you must sell so that your business has neither a profit nor a loss.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |