Working out profit and loss
The table below gives an example of business's costs and sales
| Output | Fixed costs | Variable costs | Total costs | Sales revenue | Profit/loss |
| 0 | 800 | 0 | 800 | 0 | -800 |
| 100 | 800 | 200 | 1000 | 600 | -400 |
| 200 | 800 | 400 | 1200 | 1200 | 0 |
| 300 | 800 | 600 | 1400 | 1800 | 400 |
| 400 | 800 | 800 | 1600 | 2400 | 800 |
| Output | 0 |
|---|---|
| Fixed costs | 800 |
| Variable costs | 0 |
| Total costs | 800 |
| Sales revenue | 0 |
| Profit/loss | -800 |
| Output | 100 |
|---|---|
| Fixed costs | 800 |
| Variable costs | 200 |
| Total costs | 1000 |
| Sales revenue | 600 |
| Profit/loss | -400 |
| Output | 200 |
|---|---|
| Fixed costs | 800 |
| Variable costs | 400 |
| Total costs | 1200 |
| Sales revenue | 1200 |
| Profit/loss | 0 |
| Output | 300 |
|---|---|
| Fixed costs | 800 |
| Variable costs | 600 |
| Total costs | 1400 |
| Sales revenue | 1800 |
| Profit/loss | 400 |
| Output | 400 |
|---|---|
| Fixed costs | 800 |
| Variable costs | 800 |
| Total costs | 1600 |
| Sales revenue | 2400 |
| Profit/loss | 800 |
From this table you can see that:
- fixed costs are 拢800 regardless of the output
- variable costs increase as output increases
Calculating total profit
To calculate the company's total profit or loss you subtract the total costs from the sales revenue:
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When neither a profit nor loss is made the company breaks even. This company would have to sell 200 units to break even.
Calculating selling price
Selling price can be calculated by dividing the sales revenue by the output:
\(\boldsymbol{selling\,\,price\,\,=\frac{sales\,\,revenue}{output}}\)
In the example above the sales revenue at break-even is 拢1200 and 200 units are sold. This would mean the selling price per unit would be 拢6.