Profit Analysis
As opposite to break-even, companies are more interested in realizing profits. Profit Analysis, is a mathematical computation that helps a business identify the point where it reaches a specific target of profit.
This profit analysis calculator allows a business to accomplish the following:
- Determine the quantity it needs to produce or sell in order to realize a specific profit;
- Determine the selling price it needs to charge for a specific quantity you sell in order to realize a specific profit.
Definitions and terms used in the Profit Analysis
- Selling Price per Unit: the price that a unit is expected to be sold for.
- Selling Units: the number of units expected to be sold (determined by a contract or market research).
- Fixed Cost (FC): the cost that remains constant within a range of production or sales, regardless of the number of units produced or sold within that range. Typical fixed costs are: rent, mortgage, equipment, salaries, insurance, fixed utilities (office utilities) etc.
- Variable Cost per Unit: the cost that vary with the production or the purchase of one unit.
- Target Profit: the profit that the company intend to realize.
- Target point: the point where the Target Profit is realized.
- Total Variable Cost (VC): the cost that varies directly with the number of units produced or sold. Typical variable costs are: materials, packaging and shipping, sales commission, hourly wages, variable utilities (factory utilities) etc.
Total Variable Cost = Selling Units x Variable Cost per Unit - Total Cost (TC): total expenses incurred in the process of producing or selling a number of units.
Total Cost (TC) = Fixed Cost (FC) + Total Variable Cost (VC) - Total Revenue: the total sales value of the units produced or sold.
Total Revenue = Selling Units x Selling Price per Unit - Profit: the benefits from producing or selling a number of units.
Profit = Total Revenue - Total Cost - Profit margin: the ratio of profitability calculated as Profit divided by Total Revenue. Profit margin is an indicator of a company's pricing policies and its ability to control costs. It measures how much out of every dollar of sales a company actually keeps in earnings (expressed as a percentage).
Profit Margin = (Total Revenues - Total Cost) / Total Revenues x 100 - Markup: the amount added to the cost of a product to cover expenses and profit in fixing the selling price. Markup is equal to profit.
- Markup percent: the ratio calculated as Markup divided by Total Cost. It measures how much is added to the cost in order to determine the selling price.
Markup percent = (Total Revenues - Total Cost) / Total Cost x 100
Terms of use
1. Complementarily, in order to do the Profit Analysis for your business, we offer a calculator free of charge. However, we appreciate a donation if you value our tools and services.
2. You may link to this calculator from your website as long as you give proper credit to
C. C. D. Consultants Inc. and there exists a visible link to our website.
3. Although C. C. D. Consultants Inc.'s personnel has verified and validated the Profit Analysis calculator, C. C. D. Consultants Inc. is not responsible for any outcome derived from its use. The use of Profit Analysis calculator is the sole responsibility of the user and the outcome is not meant to be used for legal, tax, or investment advice.
