The economic concept of critical sales volume corresponds to position of the enterprise in the market at which proceeds from sales of goods are minimum. Such situation is called a profitability point when demand for products falls and profit hardly covers prime cost. To determine critical sales volume, use several methods.
Instruction
1. The running cycle of the enterprise is not limited to its primary activity – production of goods or services. It is difficult organization of labor of the certain structure including work of the main personnel, administrative personnel, management structure, etc. and also economists whose task – the financial analysis of activity of the enterprise.
2. The purpose of this analysis is calculation of some sizes which to a degree influence the amount of final profit. These are different types of the outputs and realization, full and average product cost, indicators of supply and demand, etc. The main objective is to reveal such output at which the resistant interrelation between expenses and profit is established.
3. The minimum sales volume at which income completely covers cost, but does not increase equity of the company, is called critical sales volume. There are three methods of calculation of a way of this indicator: method of the equations, marginal income and graphic.
4. To determine critical sales volume by the first method, work out the look equation: Vp – Zper – Zpos = Software = 0, where: Vp – proceeds from sales of goods; Filched also Zpos – expenses variables and constants; Software – profit on sale.
5. By other method first composed, proceeds from sales, present in the form works of marginal income from a commodity unit on sales volume, the same concerns variable costs. Constant expenses extend to all consignment therefore a component leave this to the general: MD·N-Zper1·N - of Zpos = 0.
6. Express size N from this equation, and you receive critical sales volume: N = Zpos / (MD – Zper1), where Zper1 – variable costs on a commodity unit.
7. The graphic method assumes creation of function graphs. Apply two lines on the coordinate plane: function of proceeds from sales minus both types of expenses and function of profit. Postpone production volume for abscissa axes, and on ordinate axis – the income from the corresponding quantity of goods expressed in monetary units. The point of intersection of these lines corresponds to the critical sales volume, position of profitability.