A **contribution margin** is the price share of a product after deducting the direct costs as raw material. That's how much to spare to pay fixed costs and generate profit for the business. From it, one discovers the amount of sales necessary to reach the breakeven.

**In this article we will talk about:**

- How much for your company to pay fixed costs and make a profit
- After all, what is the contribution margin
- Knowing the margin of contribution, let us go to the Point of Equilibrium
- How about an exercise?
- To help you in practice

**See also:** Pricing Manual

## Find out how much for your company to pay fixed costs and make a profit

Often speaking of **contribution margin (MC), break-even point** or other financial indicators may leave you somewhat confused. The truth is that many entrepreneurs and entrepreneurs end up forgetting to analyze these numbers when it comes to pricing their products or services. The problem is that it is essential to understand whether your business is profitable or not and how much it can improve. But not to get too abstract in the beginning, let's understand the margin of contribution ...

## After all, what is Contribution Margin?

Basically, quite simply, **margin of contribution is how much of revenue to pay the fixed costs and consequently make a profit after sales,** that is, it indicates how much revenue is left after the direct costs discount. It can be classified as unit contribution margin, when the analysis is made solely on a product / service or total, when it is made for all its production / productive capacity.

Your contribution margin can also be calculated in percent (although I find it more complex and difficult to understand in this way). Let's look at an example of Contribution Margin Calculation Worksheet and LUZ Balance Point:

As you can see, after calculating your revenues, minus the direct costs, you can already see your contribution margin. In this case, we are seeing the total contribution margin. That means if your fixed costs were larger than $ 6000, you would have been suffering ... Did you begin to understand the importance of this small calculation? One must be aware of the fact that **"Product does not make a profit. Product gives margin of contribution. The company as a whole is supposed to make a profit. "**

Let's take a look at how to do it without the spreadsheet, just using your same notebook:

**MC = PV - (CV + DV)**

Where: MC = Unit contribution margin; PV = Unit Sale Price; CV = Unit variable cost or Cost of Goods Sold (CMV) and DV = Unit variable cost. If you want to transform this into the whole company, simply multiply all the values by the quantity produced or offered services.

So if for example your company sold shirts and we had the following information:

- The shirt price is R $ 70
- We sold 50 shirts in the last month
- The cost of the shirt directly from the supplier is R $ 30
- We have 10%
- We have commissions from 3 vendors%

Let's do the math for the whole company?

Revenue = R $ 70 x 50 = R $ 3.500

Variable Cost = R $ 30 x 50 = R $ 1.500

Variable Expenses = (R $ 70 x 50 x 0,1) + (R $ 70 x 50 x 0,03) = R $ 350 + 105 = R $ 455

Then, the calculation of Contribution Margin would be: MC = R $ 3.500 - (R $ 1.500 + R $ 455) = R $ 1545. It seems harder than it is, does not it? **It is this kind of calculation that will allow you to understand what the ideal sales price is and if you can generate the necessary sales volume for your financial sustainability.**

## Knowing your MC, let's get to the Point of Equilibrium

**Break Even, also known as Break Even Point, is the indicator that tells you how much you need to bill in a month to tie the company accounts from zero to zero.** In a simple way, calculating the break-even point allows you to know the number of units that must be sold to achieve the "financial tie". Theoretically, if your company sells that particular number of units, it will make R $ 0,00 profit / loss in the period in question.

This type of information is essential to analyze the viability of your business. If, for a little bit or another, your equilibrium point is impossible if you can achieve it with your production capacity, something needs to be done. Let's see another example, this time from Balance Calculation Worksheet from LUZ:

In this case, after making the account (direct revenues), we realized that there was left over $ 9.500 to pay the fixed costs (which in this case were $ 8.800), indicating that there was $ 700 of profit left. The cool thing is that in a simple way we can understand how to do the balance point calculation.

## How about an exercise to finish?

These are the simplified data for a company that sells jewelry:

- The price of the jewelry is R $ 1000
- The company has sold 300 jewelry in the last month
- The cost of jewelry direct from the supplier is R $ 250
- We have 20%

What is the unit and total contribution margin? **Just answer here in the comments I tell you whether it's right or not.**

#### Post subject:

Although it has a complicated name and does not mean so much in the first analysis, the contribution margin is too important for your business and therefore needs to be taken into account when you are defining your business. pricing strategy. So remember that:

- Unit Contribution Margin = Unit Sales Price - (Unit Variable Costs + Unit Variable Expenses)
- When thinking about your selling price, remember to evaluate the margin of contribution and the reflexes that this will provoke in the necessary volume of sales and not according to the price of the competition;
- Identify the minimum sales volume required to pay (breakeven) and eventually how much to sell to get the profit you want.

## To help you in practice:

If you liked the theme but were not yet familiar or would like to have practical management tools to do the calculations without work, I have a worksheet that might interest you:

Hi Larisse, this is our post that addresses the subject in a more specific way - you can find references in our pricing posts

Ola Rafael I am studying this subject of unit contribution margins would have more material available for reading?

Hi Lusia, the 4 article is from July 2013 and the author is myself AVILA, Rafael

I would like to know the bibliographic reference of this article! Thank you.

Come on Priscilla, we have to understand what are the indicators that are not being shown there:

- Unit Price = 625.000 / 25.000 = R $ 25,00

- Unit Cost = 375.000 / 25.000 = R $ 15,00

- Unit Contribution Margin = Sales Price - Unit Cost = 25 - 15 = R $ 10 ie for each product sold, R $ 10 is left over

Responding

A) Balance Point = Fixed Costs / Contribution Mg = 150.000 / 10 = 15.000 products need to be sold to reach P. Equilíbrio

B) Contribution Mg = Revenue - Costs = R $ 250.000 (if unitary, we already calculate)

C) If 30.000 units were sold, the revenue would be = 750.000 - 450.000 - 150.000 = R $ 150.000 of result

D) 15.000 units pay fixed costs + 12.000 units generate profit 120.000 = 27.000 units sold and revenue is = 27.000 * 25 = 675.000 XNUMX

Good morning, Rafael

I'm having trouble resolving issues C and D of the exercise below, could you help me?

Company X, sold 25.000 units and obtained the following result:

Sales: R $ 625.000,00 Variable Costs: R $ 375.000,00 Fixed Costs: R $ 150.000,00

Calculate:

A) Balance Point = ANSWER: 0,6

B) Contribution Margin = ANSWER: 0,4%

C) Result of the operation to be sold 30.000 units = ANSWER:?

D) To get $ 120.000 of profit, how many units should you sell? What income will be earned? = ANSWER:?

Thank you!

Hi, Lilia, everything okay? The difference in a firm between fixed and variable costs is that fixed costs occur independently of sales and production and variables only occur when the company produces. In your case, the fixed costs would be those that you have every month, for example, accounts with fixed values, etc. The variables are only those that arise when you have tenants renting the house.

Rafael, I want to rent a room in my home and I want to know how to calculate the rental price, within the fixed costs that I have identified are: water, electricity, gas, internet, housing management, but I am not very clear how to classify if (fixed or variable) the payment to the person who does the cleaning and the elements of cleanliness, and for this case of rent; What would the variable costs be? I can not think of it. can you help me

In the case of the proposed Jewelery, we have 300.000 of revenues minus 75.000 of direct costs and minus 60.000 of taxes, making the correct contribution margin result to be 300.000 - 135.000

Hi Mário, depends on the interpretation of what is being subtracted. The contribution margin only considers costs. If variable expenses for this exercise is a cost too, it should come in, but if it is not, it should not.

Hi Jorge, the result is the same, if you have 6.000 left over from 10.000 (indicating that they were 4.000 of direct costs), the MC in% is 60%

To calculate in%, do I just divide the Contribution Margin by the selling price?

That is, in the 1 example, would I divide 6.000 by 10.000? 60% MC, right?

In the Jewelry case, 60000,00 of variable expenses entered the account! I was in doubt

Good morning, I would like to know, because in the account that Valeria put up, 8400,00 did not enter the Contribution Margin function Mc = 89000,00 - (26500,00 + 8400,000), would not that be the answer?

89000,00- 34900,00; Mc = 54100?

Sorry for the doubt, I would like to understand;

Hi Adria, I researched here and the margin of safety is the quantity sold that exceeded the breakeven point. As the exercise says that 258 products have been sold and the break-even point is 224, the margin of safety calculation is 258-224 = 34

This is a good trick to fool anyone who does not know the term

This is the 24 -Prova Blue -Proof issue of the 2018 / 1 Examination and in the feedback template is letter A 34 units. I failed because I found the value of 224 units. Do you know how to get there?

The unit contribution margin is 600 - 350 = 250, that is, for each product sold, 250 is left to pay the fixed expenses. I do not know if I understood what the exercise means with operational safety margin, if it is the amount that should be sold to tie up revenues and expenses, it should sell 56.000 / 250 = 224 units (I know that name as break even) , but it seems to me the solution

One company is manufacturing and selling 5 one thousand units of its x monthly product. Your monthly costs and expenses are:

* Fixed: R $ 800.000,00.

* Variables: R $ 300.000,00.

Determine the unit selling price that the company should practice, maintaining the same manufactured and sold quantity, as well as current costs, to obtain the operating profit of 20% d selling price.

A) R $ 91,50

B) R $ 92,50

C) R $ 95,00

D) R $ 93,00

Hello. Good morning, Rafael Ávila! Can you help me with this question? Thanks in advance!

Consider the following data from Liberati S / A:

* Quantity sold = 258 u.

* Variable costs and expenses = R $ 350,00 / u.

* Fixed costs and expenses = R $ 56000,00 / month.

* Selling price = R $ 600,00 / u

The operational safety margin, in units, is:

A) 34 units.

B) 38 units.

C) 224 units.

D) 258 units.

Hi Thales, I would not go in. Contribution margin is the amount left over from revenues after subtracting costs only

Would not the contribution margin go into 8400's expense too?

It is necessary to understand what interpretation he gives for costs and wants. In general, MC is calculated by selling price less costs. Assuming he considers the two costs that are there, the MC would be 89.000 - 26.500 = 62.500

Not necessarily, you can do the general directly depending on the values you have

You used the 35.353 value incorrectly - the correct one is 35.243

Good afternoon. I need to calculate an exercise and I can not, can anybody help me?

89.000,00 Recipe

Fixed Cost: 15.000,00

Variable Costs: 11.500,00

Variable expenses: 8.400,00

I need to know the contribution margin.

I had done it that way, but it made difference in unitary, what did I do wrong Rafael?

MC = PV - (CV + DV)

Revenue = R $ 5000 x 17,00 = R $ 85.000,00

Variable Cost = R $ 35.343,00

Variable Expenses = R $ 20.507,00

MC = 85.000,00 - (35.343,00 + 20.507,00)

MC = 85.000,00 - 55.850,00

MC = 29.150,00 - (TOTAL)

MC = 29.150,00 / 5000

MCU = R $ 5,83 - (UNITARY)

I understood, Rafael ...

In this case, in order to find the full margin, do I first have to find the unitary?

Hi Adilson, considering that the value of electric energy goes into the cost, you would have 17 - 11,15 ((35.243 + 20.507) / 5000) = 5,85 is the unit MC, for the total it is only multiplying that value by 5000

Hi Adilson, your calculations seem correct. The unit MC would be this value found divided by the number of jewels (300). You can also do this account in a unitary way too, which would be 1000 (price) - 250 (cost) - 200 (taxes) = 550 or 165.000 / 300 = 550

PERSONAL SOMEONE CAN HELP ME WITH THIS EXERCISE?

Company X sold its production (5.000 units) in the month at a unit price of R $ 17,00 and taking as cost variable raw materials in the amount of R $ 35.243,00 and Electric Energy in the total amount of R $ 20.507,00

WHAT WOULD BE THE TOTAL AND UNITARY CONTRIBUTION MARGIN?

Good Afternoon Friends, I did this exercise, but I would like to know what the margin of unitary contribution would be, since the margin I found would be a total contribution? help me please ?

These are the simplified data for a company that sells jewelry:

• The price of the jewelry is R $ 1000

• The company sold 300 jewelry in the last month

• The supplier's direct jewelry cost is R $ 250

• We have 20%

What is the unit and total contribution margin?

Exercise:

MC = PV - (CV + DV)

Revenue = $ 1000 x 300 = 300.000,00

Variable Cost = $ 250 x 300 = 75.000,000

Variable Expenses = (1000 x 300 x 0,20) = 60.000,00

MC = 300.000,00 - (75.000,00 + 60.000,00)

MC = 300.000,00 - 135.000,00

MC = 165.000,00 - (Would this margin be the correct total?) And what would be the unit margin?

margin of safety of 112 units

selling price 450,00 and variable cost of 65% of the sale price, what gross profit?

Who knows the formula?

Thanks for the words Jeferson!

Hi Machanana, what is your specific doubt?

Hi, I have a doubt here in this ezercicio,

as I shall discover the margin of contibution of a third as it says here in the Exercise.

I would like someone to help me solve this issue of the exercise.

I thank you

THEN THE QUESTION BELOW:

After a survey on the process of manufacturing and selling a particular product, a manufacturer realized that:

A third of the price of the price for which he sells his products to the stores is taxed, that is, it must be collected for the government;

The raw material cost per unit of product is R $ 10,00;

The payment of labor, machinery and facilities represents a monthly fixed expense, regardless of the quantity manufactured, of R $ 100.000,00.

(a) Determine the expression of profit L with the manufacture and sale of a product, considering only the cost of raw materials and taxes, having as variable the price P of sale to stores.

(b) Determine the expression representing the monthly L_t profit obtained from the manufacturing and sale of N monthly units of the product, sold to stores at the price P. For this profit, consider the expenses that affect each unit (raw materials and taxes ) and fixed expenses.

(c) In order for the break-even point to be reached, how many units need to be produced in a month, considering that all units will be sold?

Dude, if I told you that I was on a Sebrae course and I was not able to understand what this "contribution margin" is ... they spoke and spoke and did not clarify anything, I had to come to Google and search, not It took me a long time, I entered this site and in the first 5 lines I already understood what MC is ...

Vlw by text !!! Useful!

Hi Arthur, overall the contribution margin is calculated by subtracting the costs related to the product, in this case cost of production + variable expenses of the product

The break-even point is calculated using the fixed cost divided by the contribution margin

The value of unitary MC should not necessarily be greater than that of fixed monthly expenses (normally it is not), since we are talking about a single product.XXUMX

The quantity of products that you must sell is equal to the value of the equilibrium point rounded up normally (since it is not usually possible to sell a piece of a product - if the answer is a decimal)

Great content friend! It was a great help.

I was able to solve your exercise, but I would like to imagine a new scenario for a Product A of a company:

> Product A

> Selling price - R $ 325

> Production cost of the product - R $ 130

> Variable product expenses - 5% of tax (RS)

> Monthly fixed expenses of the company - R $ 340 / month

> Variable monthly expenses of the company - R $ 400 / month

What is the Contribution Margin of this product and the Point of Balance?

Should the unit MC value be greater than the company's Monthly Fixed Expenses?

How many products will I have to sell to the company?

Thank you!

300000,00- (75000,00 + 6000,00)

= 300000,00-135000,00

= 165000,00 = MC 55% Media 12,22%

Hi Gabriela, have you tried replacing the Q with the 100, 200, 300, 400 and 500 values to see what the CT result is?

Whereas the function which calculates the

total cost of the purchase transaction is either:

CT = 100 × 10000 / Q + 50xQ / 2, where

Q = the purchase quantity that results in the

lower cost of the purchase operation, then the

value of Q which will result in the lowest value of

cost of the purchase operation is

(A) 100 units.

(B) 200 units.

(C) 300 units.

(D) 400 units.

(E) 500 units.

Please, could you help me to solve this question?

Hi Bruno, how are you? It appears that 70% of the sales price is allocated to costs, which indicates a contribution margin of 30%, which is 0,3. To calculate the break-even point simply divide the fixed costs by the contribution margin.

I only missed the selling price in the equation

I thank you very much for helping me on this issue, I can not

a company has total fixed cost of 30000.In the sale of each product, 17% of prices are taxes, 4% are of the commission of sellers and 49% is variable cost of production.How much should be revenue at break-even?

Hi, Octávio.

I am not a member of the administrators of the page, but I am an accounting student and I have decided to make the calculations for you of some questions that were requested.

Regarding room 1, the doubts have already been solved by @lnjaine: disqus, then I will only answer the two other rooms, respectively.

a) 2-MC = R $ 190

3- MC = R $ 320

b) 2- PE = 66,66 rooms (rounding 67 rooms)

3- PE = 93,33 rooms (rounding 93 rooms)

c) 2- Occupancy Rate = 47,6%

3 - Occupation Rate = 103,7%

d) According to the data presented, the hotel 3.

e) The hotel 2.

f) The hotel 1.

g) Reduce fixed and / or variable expenses or increase the daily price. Consequences: improvement in contribution margin.

H) -

Hi Amanda, a good or bad profit depends on your expectation and what you intend with the business. That said, because it is a high investment, you have to worry about the demand and if you can maintain that demand over time, it also does not help sell 10 times and then have no more to sell.

Having said that, if you have already worried about future demand, you are sure that you can sell in the present and have the money for it, it may be a good alternative, but I would not fail to analyze every possibility. If you want a spreadsheet to help you in practice, I recommend our feasibility study - https://luz.vc/planilhas-empresariais/planilha-de-estudo-de-viabilidade-economica

Hi. I'm a microentrepreneur. I need to invest 11 thousand in the producer and I will sell for 14 thousand. Taking out transportation expenses (I will not need to invest in real estate and things like that) I have 2 thousand left over for sale. How do I make 4 sale in the month a good profit?

My fear is that it is a high investment, but in compensation the demand is high. And those 11 thousand that I will invest the first time, will continue to spin and will be with them that I will always buy the product to resell. I hope I explained well

Hi, Rodrigo, everything good?

You can make the individual contribution margin, find out how much each product helps you pay the costs and make a projection or directly put the sales amount of each.

We have a spreadsheet that exactly serves to make this calculation of several products - https://luz.vc/planilhas-empresariais/planilha-de-calculo-de-ponto-de-equilibrio-excel

I hope it helps and if you have other questions just talk

Dear,

In the case of jewelry you used as cost R $ 250,00 and price R $ 1000,00, beauty serves as a very simple example. But if you take into account that this jewelry store has 50 types of jewelry with 50 prices and 50 different costs ?. How to calculate the contribution margin and the break-even point in this case? Here in my factory we have approximately 50 types of products.

That's right, Camilo!

it's that same line of thought, big hug

R $165000,00

Step 01: Revenue: $ 1000,00 x 300 = $ 300000,00

02 Step: Variable Cost: R $ 250,00 x 300 = R $ 75000,00

Step 03: Variable Expenses: $ 300000,00 x 20% = $ 60000,00

Final Step: Contribution Margin = R $ 300000,00 - (R $ 75000,00 + R $ 60000,00)

R $ 300000,00 - R $ 135000,00

R $165000,00

Did I?

Hi Angelica

The contribution margin is an indicator that indicates how much a product contributed to the formation of the final profit. In this case, it looks like the unit is sold at $ 5.000,00 and has a cost of $ 2.500. Therefore, the unit contribution margin would be the subtraction of each other, resulting in R $ 2.500,00 of MC.

Hugs!

what is the value of the contribution margin of a company that produces 100 units of a product and has the following data: sales revenue: 500,000; variable expenses; 250,000; fixed costs: 100,000.

Good afternoon, I realized that in this case I'm at a loss.

Grato

Good morning Leandro, as for the calculation everything ok, but, because with these new values that I got the occupancy reaches 103%, could you help me?

Hi Octavio,

It's OK? Thanks for the comment! The reasoning that you must follow is exactly the same as my previous answer below. Now, if you need to deepen these calculations and make different scenarios many times, I'll come back to suggest our break-even calculation worksheet, it might help you a lot, okay? Follow the link: https://luz.vc/planilhas-empresariais/planilha-de-calculo-de-ponto-de-equilibrio-excel

Hugs!

Good morning, I need to know what the contribution margin is, per room, your break-even point, how many rooms you need

rent in the month so that the hotel has neither profit nor loss. Considering a month of 30 days, what would be the percentage level of occupation of the

rooms in the month to get the break even. The daily costs 500,00, the number of rooms is 90, variable costs and expenses per day is 180,00 and the fixed costs and expenses in the month is $ 896.000,00.

I have these values: vr of a daily rate of a hotel, $ 500,00, qtde of rooms 90, costs and desp. variables per day $ 180,00 and costs and desp. fixed in the month $ 896.000,00.

I ask:

How do I calculate the contribution margin per room of each hotel?

What is the balance of each hotel?

That is, how many rooms do you need

rent in the month so that the hotel has neither profit nor loss?

Considering a month of 30 days, what would be the percentage level of occupation of the

rooms of each hotel in the month, to obtain the balance point?

I got this answer through Leandro, but my note screwed, and I tried to send it back but it did not. Can you help me?

Good evening Leandro Borges, I'm grateful for your information, I have a job to do but my time is too short, I have two jobs I'm sending the work material if you can help me thank you. Worth knowing about Pitangueiras Hotel

Location - Bahia

Hotel Dunas do

Paradise -

Location - Natal

Hotel Recanto do

North - Location

Alagoas Average value of

Daily 350,00 440,00 500,00 Number of rooms 120 140 90 Costs and expenses

variables per night 120,00 250,00 180,00 Fixed costs and expenses per month 506.000,00 380.000,00 896.000,00a) What is the contribution margin per room of each hotel? b) What is the balance of each hotel? That is, how many rooms do you need to rent in the month so that the hotel has neither profit nor loss?

c) Considering a month of 30 days, what would be the percentage level of occupancy of the rooms of each hotel in the month, in order to obtain the break-even point? d) What is the worst investment alternative? e) Among the two best alternatives, in a month of high tourist demand (occupancy level of 90% of the rooms, for example), which hotel would give the biggest profit? f) Among the two best alternatives, in a month of low tourist demand (occupancy level of 30% of the rooms, for example), which hotel would do the most damage?

g) What kind of action could be taken to reverse this situation and what are the possible consequences?

h) Knowing that on the day 1 to 10 day were used several rooms referring to the establishment chosen as the best investment, check the fashion and the median referring to the rooms.

For the resolution of the question "H", it follows the calendar of days 1 to 10 of April as well as its occupation, namely:

1 April - 2 - 4 - 6 - 8 - 9 - 10 - 11 - 12 - 15 - 28 - 32 - 45 - 48 - 50 - 54 2 April - 3 - 5 - 7 - 8 - 9 - 13 - 15 - 19 - 20 - 32 - 34 - 36 - 53 - 54 - 58 3 April - 1 - 2 - 3 - 4 - 5 - 19 - 20 - 21 - 22 - 26 - 45 - 46 - 48 - 53 - 54 4 April - 5 - 6 - 7 - 8 - 9 - 10 - 11 - 12 - 14 - 16 - 18 - 20 - 32 - 45 - 56 5 April - 2 - 3 - 4 - 5 - 8 - 11 - 12 - 13 - 14 - 15 - 17 - 19 - 23 - 54 - 56 - 6 - 3 - 6 - 7 - 8 - 9 - 14 - 16 - 18 - 21 - 33 - 35 - 37 - 54 - 58 - 60 - 7 - 1 - 3 - 5 - UMX - 7 - 9- 19 - 21 - 23 - 25 - 27 - 47 - 49 - 51 - 53 - 60 - 8 1 April - 2 - 3 - 8 - 9 - 10 - 11 - 13 - 14 - 19 - 20 - 21 - 32 - 45 - 56 - 9 1 April - 4 - 5 - 6 - 9 - 20 - 21 - 23 - 25 - 27 - 49 - 50 - 51 - 53 - 60 - 10 1abril - 3 - 5- 8 - 9 - 10 - 11 - 23 - 24 - 29 - 50 - 51 - 52 - 56 - 58 - XNUMX Thank you very much.

A hard tackle from Octavio Luiz to Giusti CEL. 998504499

Subject: Re: Comment on What is and how to calculate the contribution margin?

Hi Octavio,

You have R $ 230 of contribution margin per room (350-120). Then, you must find the amount of daily that would pay the fixed cost, that is, R $ 506.000,00 divided by R $ 230,00. Of this, you have the value of 2200 per day. That would be the volume of your break-even point. But as you are a hotel and work with occupancy rate, you could divide this amount by 30 days (a normal month) arriving at 73 rooms per day. Since you have 120 rooms, this would give an occupancy rate of 61% approximately.

We have a pretty cool spreadsheet I used to make this calculation, but it is good to do several studies of the genre. If interested, see this link: https://luz.vc/planilhas-empresariais/planilha-de-calculo-de-ponto-de-equilibrio-excel

Hugs!

I have these values: vr of a daily rate of a hotel, $ 350,00, qtde of 120 rooms, costs and desp. variables per day $ 120,00 and costs and desp. fixed in the month $ 506.000,00, as I calculate the MC.

Hi Rafael,

Typically, purchases of raw material are considered variable cost, but financial analysis is not an exact% 100 science. If you consider that it will help you more in visualizing your data, it is also valid to imagine it as a fixed cost, okay?

Hugs!

Hello good day

I have a doubt that maybe you can help me, I have a company of partitions, and I always buy the material in different quantities every month and always in installments. So for example if I buy a piece of material in 5 times, do I consider this value during this time as a fixed or variable cost?

Hi Mariana,

Are you referring to the example of the post? Or is it something else?

Hugs!

Can you help me with a question, why is the margin on sales less than the margin on costs?

Hi Miriam, how are things good?

I think the first step is to understand why you came in this moment of despair and debt. To do this, he would try to understand the reality of his situation in some ways:

1 - Is this huge amount of products essential? What are your revenue-generating products? Is it possible to focus on them just to avoid costs with other items?

2 - What is the biggest focus of your debt? Personnel expenses? Expenses with equipment and maintenance? Rental expenses? Is it possible to get rid of or diminish some of them while maintaining their operational capacity?

3 - How's the number of customers going? Are they new or recurring? Can you keep your audience loyal? Do you have strategies to promote your company?

After answering these questions, I think you will get a greater clarity of where you should go. If you want, you can send me the answers in rafael@luz.vc and what I can help the most I'm on hand, okay?

After this first step and direction, I would have a greater focus on management so as not to allow the situation to continue.

Hello good Morning! I liked the blog. I'm desperate. I need to save my business. I have an automotive oil change. I have a huge range of products. I'm in debt and I do not know where to start. Can you help me?

I think that's right Robert, if I can help more, just tell me

Hi Jose, it's different yes. The Contribution Margin is your gross revenue subtracted from your variable costs. while the profit obtained still has some other subtractions. See the simplified example:

1. of the month - 10000

2. variable costs - 3000

3. Contribution margin - (1 - 2) = 7000

4. fixed costs - 4000

5. Net Income - (3 - 4) = 3000

6. profitability - (5 / 1) = 30%

In the case of a parking lot, the contribution margin will be the subtracted revenue from the variable costs related to the operation of the business. I can imagine a few variable costs, but some of them are maintenance of gate and equipment, extra expenses with fines or breakdowns in cars and the like.

I hope I helped

MC is different from profit, right? How to calculate the MC of a parking lot?

In the above example is not wrong 236 shirts (would not be 232?) As well as the amount of billing to get in the EP?

Hi Robert,

I'll answer here, okay? Basically, you have to divide your Total Fixed Costs by the Unit Contribution Margin to know the breakeven volume, okay?

Hugs!

already understood. In fact, the two are right that dividing the total of DF or CF by 38,00 (unit of MC) would not be the same in relation to the total value of sales to reach the EP.

That is, 8800 / 38,00 (MCu) relative to MC would be the same as 8800 / 0,76 in relation to sales.

or would PE = 8800,00 / 0,76 ???

Does this mean that for the break-even point I divide the total expenses by MCu ?? in that case would be 8.800,00 / 38,00 then the PE would be 232 units sold to cover the expenses ????

That's right, Pedro!

Hugs!

550mc unit, 165000mc total