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Math DAY!!! This will be much easier than you think it will. Fixed Cost Variable Cost Profit Revenue Marginal Contribution Break Even Point amount Break Even Dollars

What is Selling price The actual final price of a product or service that compa ny charges a purchaser to buy the item.

Variable costs vs fixed costs A fixed cost not change with an increase or decrease in the amount of goods or services produced or sold. Fixed costs are expenses that have to be paid by a company, independent of any business activity. It is one of the two components of the total cost of running a business, along with variable cost.

Fixed Costs Amortization: gradual charging to expense of the cost Depreciation: gradual charging to expense of the cost of a tangible asset  Insurance. Periodic charge under an insurance contract. Interest expense. Cost of funds loaned to a business by a lender.

More Fixed Costs Property taxes. Tax charged to a business by the local government, which is based on the cost of its assets. Rent. This is a periodic charge for the use of real estate owned by a landlord. Salaries. This is a fixed compensation amount paid to employees, irrespective of their hours worked. Utilities. This is the cost of electricity, gas, phones, and so forth. This cost has a variable element, but is largely fixed.

Fixed Costs

Variable Costs A variable cost is a corporate expense that changes in proportion with production output. Variable costs increase or decrease depending on a company's production volume; they rise as production increases and fall as production decreases.

Variable Costs Examples Direct materials. raw materials Piece rate labor. Amount paid to workers for every unit completed (not regular wages) Production supplies. Things like machinery oil are consumed based on the amount of machinery usage, so these costs vary with production volume. Billable staff wages. If a company bills out the time of its employees.

Variable Costs Examples Commissions. Salespeople are paid a commission only if they sell products or services. Credit card fees. Fees are only charged to a business if it accepts credit card purchases from customers. Percentage of sales. Freight out. A business incurs a shipping cost only when it sells and ships out a product.

Variable Costs

Sal and Mario’s Pizza Shop Which are fixed and which variable?

Revenue= money company actually, including discounts and deductions for returned merchandise.  Profit = a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.

Break-Even Point (BEP) In general, the break-even point, or BEP, is where gains equal losses. In business, the BEP is the point where revenue equals expenses. At this point, there is no profit. For a business, knowing and reaching the BEP is the first major step toward creating a profitable company. The break-even point is when earnings equal the costs to earn them, which means there is no profit and no loss. You break even.

My product costs $15, and 7 are sold this week My product costs $15, and 7 are sold this week. My fixed costs for the week are $94.50, and my variable costs to produce my product are $1.50 per unit. Price = P = Number sold = X = Fixed Costs = FC = Variable Costs = V = Equation Px = Vx + FC

If Revenue = Expenses + Profit, and profit is 0 at the BEP, then Revenue = Expenses at the BEP.

(15) x (7 units) = (1. 50) x (7 units) + 94. 50 105 = 10. 50 + 94 (15) x (7 units) = (1.50) x (7 units) + 94.50 105 = 10.50 + 94.50 $105 = $105 Revenue = Expenses I broke even this week by selling 7 units at $15 each. Had I sold 11 units instead of 7 units this week, my revenue would have exceeded my expenses and I would have made a profit. How much profit would I have made?

Contribution Margin An important term used in BEP analysis is contribution margin. This is the amount of revenue available to pay the fixed costs for a business. If the contribution margin is less than the fixed costs, the BEP has not been reached. When the contribution margin equals fixed costs, you are at the BEP. If the contribution margin exceeds fixed costs, there is a profit.

To Find break-even sales dollars = break even amount X price

Sal and Mario’s Pizza Shop Which are fixed and which variable?

What’s the minimum they should charge for 1 pizza? 2. If Sal and Mario price their pizzas at $10 each, what is their contribution margin? Contribution Margin = revenue- Variable cost =

Calculate the break-even sales units an break-even sales dollar figures. Break-even sales units = fixed costs/ (price – variable costs) Break even sales dollars = Price per unit X break even sales units