Chapter 8   Cost, Sales Price and Breakeven Analysis

After this Chapter 8 from ‘Business Economics VI Groundbreaking’ you can clearly indicate the point(s) above which profit is made and where loss is suffered.

Learning Content Chapter 8

Determining minimum sales price;  Breakeven Analysis.

Include or not include a certain product in the range, or a possible expansion of the production capacity; for such questions in the long term the AC approach: integral cost price. If the sales price rises above the cost price with a certain margin (everything on the basis of standard normal: the standard cost price), then we have reasoned from the costs and nothing more to add. The sales price is one of the items from the marketing mix. Incidentally, the sales price will be often dictated by the market. Then the question is not how big we will make the margin, but given the selling price, is there enough margin left? At a high price there is generally a low volume, and at a low price a high volume. Each product has (temporarily) its own specific demand curve. In one figure, one can indicate the relationship between REVENUE, COSTS and PROFIT.

Profit (margin) = Selling Price -/- Integral cost price   (AC approach)

Contribution margin = Selling Price -/- Differential costs   (DC approach)

In the short term, it is about maximizing the total contribution margin.

Profit   (AC profit   or   DC “profit“) gross, at first. Data on profit tax, and then Net Profit.

DC “profit” is gross anyway. Contribution margin is leading at DC

In Chapter 8 from ‘Business Economics VI Groundbreaking’ there are drawings with cost, revenue, profit and/or contribution margin lines not only show the Breakeven Point (s), but also the correlation between and the shifts in the various quantities.

This book harshly criticizes out-of-date Business Economics textbooks.

You are very poorly trained in business economics even at Business Schools that ignore ‘Business Economics VI Groundbreaking’.

A self-study book, hardly needing a teacher. Necessary also for many managers in companies to improve their own performance.

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