Calculating Moving Annual Break Even Statistics

One option I like in practice is a calculate moving annual statistic for Break Even Points because it’s normal to think in terms of financial years.

i.e. the July moving annual totals are August in the previous year through to this July.

Then August moving annual total becomes September last year to August this year.

This will smooth out the ups and downs, generate a trend and help you to get a better feel for your business.

Since the calculations are:

Break Even Point = Fixed Costs divided by Contribution per Unit

Contribution per Unit = Total Contribution divided by Units Sold

you will need to track on a moving annual basis

Fixed Costs

Contribution

Units Sold

What To Look For

You need to look for a consistently rising trend

For example (Moving Annual Break Even Point = MABEP)

January 375 (Fixed Costs £67,500, contribution per unit £180)

February 402

March 431

April 426

May 447

June 461

In just six months we’ve seen a 22.9% increase in the Break Even Point.

That might mean Fixed Costs have increased from £67,500 to £82,980.

Or contribution per unit has fallen from £180 to £146.42.

Or some combination of both moving but it’s not good news.

Return to P1M3 How Profit Is Calculated

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