EASY CALCULATION OF BREAK EVEN AS A RESULT OF PROMOTIONAL COSTS

QUICK AND DIRTY CALCULATION OF BREAK EVEN AS A RESULT OF PROMOTIONAL COSTS

BY  EDUARDO R CASAS

Below is a simple way to calculate how many books one has to sell to recover the promotional costs ( or any additional fixed cost) of a marketing campaign.

Both in units and dollars

You need to know 4 things:

A	UNIT SALES PRICE
B	VARIABLE COTS PER UNIT
C	TOTAL FIXED COSTS
D	PROMOTION COSTS

                                             

The spread sheet is flexible so that every time you have any additional fixed costs or promotional costs  just simply enter the amounts on the cell 1 FC for fixed cots, 2 FC for promotional costs , 3 FC automatically sums up all the costs , and below you can see the results.

For those who can use EXCEL its rather simple , if you would like an EXCEL COPY PLEASE SEND AN EMAIL ADDRESS TO THIS SITE AND I WILL FORWARD A COPY .

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http://writersblocksforfictionwriting.blogspot.com/2011/07/writing-with-blocks.html

You can see given these factors that an additional 333 books need to be sold to cover this additional cost. Just plug in the cells mentioned new costs and the spread sheet gives you the new results.

QUICK AND DIRTY CALCULATION OF BREAK EVEN AS A RESULT OF PROMOTION
	LINE	BREAK EVEN IN UNITS = FIXED COSTS DIVIDED BY UNIT PRICE LESS
		VARIABLE UNIT COST
		BE=FC/(P-VC)	10X=7X+2000		SOLVE FOR X
		A	X	B	C
			UNITS	UNIT		UNIT
		SP	NEEDED TO SELL	VC	FC	MARGIN
	1	$10.00	X	$7.00	$2,000.00	$3.00
	2	PROMOTION			$1,000.00
	3	TOTAL FC			$3,000.00
		BEFORE PROMOTIONAL COSTS
					TOTAL	TOTAL	TOTAL
					VARIABLE	FIXED COSTS	COST
	4	UNIT BE	667
	5	DOLLAR BE	$6,666.67	=	$4,666.67	$2,000.00	$6,666.67
		EFFECT OF PROMOTIONAL COSTS ONLY
					TOTAL	PROMOTIONAL	TOTAL
					VARIABLE	FIXED COSTS	COST
	6	UNIT BE	333
	7	DOLLAR BE	$3,333.33	=	$2,333.33	$1,000.00	$3,333.33
		AFTER PROMOTIONAL COSTS
					TOTAL	TOTAL	TOTAL
					VARIABLE	FIXED COSTS	COST
	8	UNIT BE	1000
	9	DOLLAR BE	$10,000.00	=	$7,000.00	$3,000.00	$10,000.00