Breakeven

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:30AM in AAT student discussion
Hi,<BR><BR>If you have total costs of £48,000 per year and a contribution of £13.00 what is the breakeven point in Pounds and Units?<BR><BR>Selling price is £35.00.<BR><BR>Do you divide £48,000 by £13.00 to get amount in units then x by selling price to get amount in pounds?<BR>

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Breakeven

    3693 units<BR>£129,255<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Breakeven

    The way i like to think about contribution is the amount you save in your back pocket towards bills. So if you have an item you sell for £10 and it cost £2 in labour and £2 in materials you pay those first and then you have £6 to put in your back pocket towards the bills (or fixed costs) that come in.<BR><BR>Once you get your bills (fixed costs) in, say £5000 you can now work out how many lots of £6 you must have put in your back pocket to cover that £5000. This is £5000/£6 which gives you 833.33 on your calculator. You must round it up to 834 because if you only sell 833 units then technically you havent quite "saved" enough.<BR><BR>Also you can tack onto the end of this profit that you want to make. If you wanted to make £2,000 profit you just pretend that this is yet another fixed cost and carry on as before.

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