Example: Calculation of the Break Even Point 6. Total for Fixed Costs: Euro 1,500 a month
( includes rent, insurance, office equipment etc)
7. Variable cost of producing one can of drink:
10 cents( that is Euro 0.10)
8. Selling price to the customer / member:
25 cents( that is Euro 0.25)
9. Contribution of each product to the fixed costs:
Sales price – variable cost 10. Break Even point: Fixed Costs / Contribution
Therefore the contributionfrom each can sold is: 25c – 10c = 15c( Euro 0.15)
Therefore to calculate how many cans need to be sold to break even and cover all costs: 1,500 / 0.15 = 10,000 cans
Thus, 10,000 cans need to be sold to break even and cover all costs. Any cans sold over and above the 10, 000 can will make a unit contribution to the profits of the social start up.
If this sales amount is feasible, then you have a sales target to work towards. However, if it is not feasible, you should consider: 3. Increasing or decreasing the sales price 4. Identifying areas where you could make changes to fixed and / or variable costs
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