From the budget to the investment

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4. The budget decision
Before you decide
If possible, create accurate forecasts
Create realistic forecasts of profit and revenue
Take into account and changes to the structure of the budget
This budget deals with the fixed costs in a company
The steps required to analyze the fixed cost element
Create a list of all fixed costs per unit
Compared with the data from the past
Examination of each item for accuracy
Calculation of total fixed costs
4.2 The break-even formula
To gain an understanding of this formula , you should ask the following
question
What is the minimum amount I need to sell to cover the fixed costs ?
Required sales = Fixed costs
Formula
Fixed costs / Gross Profit per Unit
4.2.1Example of one break-even formula
Break Even
Product A
Product B
Product C
Quantity
100‘000
80‘000
30‘000
Revenue
5‘000‘000
5‘600‘000
2‘700‘000
Direct Co st
3‘500‘000
4‘000‘000
2‘100‘000
Gross Profit
1‘500‘000
1‘600‘000
600‘000
Gross Profit/Unit
15.00
20.00
20.00
Fix Cost
800‘000
700‘000
500‘000
Break Even
53‘333
35‘000
25‘000
20