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“In a break-even analysis: are all fixed costs, costs such as wages, marketing, rent, legal, accounting, utilities etc?
My marketing costs are said to increase in the second year which has confused me.
Thank you,
Marina
My marketing costs are said to increase in the second year which has confused me.
Thank you,
Marina
5 years ago
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4 Answers
Yes all fixed cost includes production overhead (factory) and non-production overhead (marketing, admin, general, distribution) when you calculate break even point.
You need to calculate two different break event point for two separate years
You need to calculate two different break event point for two separate years
Answered by [Deleted Member]
+ 1 
Marketing costs can be variable as you may differ how much you spend.
A Break-even analysis should be done YoY in my opinion. The Idea of the Break even analysis is looking at the Contribution from sales units etc and comparing the contribution to the fixed costs.
In a simple example. Sales Price per unit £5. Variable cost per unit £3. ==> contribution is £2.
Fixed Costs for the year, rent, advertising, wages etc = £20,000 for the year.
This means that we need to sell 10,000 units.
£2 x 10,000 = £20,000 = £20,000 for Fixed Costs.
When we sell 10,001, that is when the company will start to make profit.
In a simple example. Sales Price per unit £5. Variable cost per unit £3. ==> contribution is £2.
Fixed Costs for the year, rent, advertising, wages etc = £20,000 for the year.
This means that we need to sell 10,000 units.
£2 x 10,000 = £20,000 = £20,000 for Fixed Costs.
When we sell 10,001, that is when the company will start to make profit.
Answered by [Deleted Member]
The costs are fixed in relation to the number of goods sold, so whilst the marketing costs may have increased they have not increased due to more units being produced but rather the price has increased independently of the units produced and sold.
Hope this helps, thanks
Hope this helps, thanks
