How to determine the critical volume of sales

Economic concept of critical volume of sales corresponds to the position of the enterprise market, in which revenues from the sale of goods is minimal. This situation is called break even point, when the demand for products is falling and profit barely covers the cost. To determine the critical volume of sales, use several methods.

Instruction

1. The operating cycle of the enterprise is not limited to its primary activity – production of goods or services. This is a complex organization of labor of a definite structure, including the work of key personnel, managerial staff, managerial staff etc., as well as economists, whose main task is the financial analysis of activity of the enterprise.
2. The purpose of this analysis is to calculate some values, which in varying degrees affect the size of the final profit. Different volumes of production and sales, the full and average cost of production, indicators of supply and demand, etc. the Main task is to identify this production, which established a strong correlation between cost and profit.
3. The minimum volume of salesat which revenue covers costs, but does not increase the company's equity capital is called the critical volume of sales. There are three methods of calculation method of this indicator: method of the equations, marginal income, and graphics.
4. To determine the critical volume of sales on the first method, write down the equation of the form:VP – Sper – Spos = PP = 0, where:VP – revenue from salesand goods;Spar and Spas – variable and fixed costs;PP – profits from salesI.
5. According to another method, the first term, revenues from sales, present as a product of profit margin from the unit price on the volume of sales, the same applies to variable costs. Fixed costs apply to the entire batch of goods, therefore, this component of shared leave:MD•N – Зпер1•N – Spos = 0.
6. Express from this equation the value of N and you will get a critical volume of sales:N = Zpos/(MD – Зпер1), where Зпер1 – variable costs per unit of product.
7. The graphical method involves plotting of graphs of functions. Apply on the coordinate plane two lines: the function of revenue from sales minus both types of costs and the profit function. On the x-axis postpone the amount of products and y-axis and the income of the relevant quantity of the goods expressed in monetary units. The intersection of these lines corresponds to the critical volume of sales, position of break-even.